Why Does FDI Go Where it Goes? New Evidence from the Transition Economies

Kinoshita, Yuko; Campos, Nauro F.

doi:10.2139/ssrn.414540

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Why Does FDI Go Where it Goes? New Evidence from the Transition Economies

34 Pages Posted: 1 Aug 2003

See all articles by Yuko Kinoshita

Yuko Kinoshita

International Monetary Fund (IMF); University of Michigan, William Davidson Institute; Centre for Economic Policy Research (CEPR)

Nauro F. Campos

University College London; University of Michigan at Ann Arbor - The William Davidson Institute; IZA Institute of Labor Economics

Date Written: June 2003

Abstract

This paper examines the importance of agglomeration economies and institutions vis-a-vis initial conditions and factor endowments in explaining the locational choice of foreign investors. Using a unique panel data set for 25 transition economies between 1990 and 1998, we find that the main determinants are institutions, agglomeration and trade openness. We find important differences between the Eastern European and Baltic countries, on the one hand, and the former Soviet Union countries on the other: in the latter group, natural resources and infrastructure matter, while agglomeration matters only for the former group.

Keywords: foreign direct investment, transition economies

JEL Classification: F21, O16, O23, C33, P27

Suggested Citation: Suggested Citation

Kinoshita, Yuko and Campos, Nauro F., Why Does FDI Go Where it Goes? New Evidence from the Transition Economies (June 2003). Available at SSRN: https://ssrn.com/abstract=414540 or http://dx.doi.org/10.2139/ssrn.414540