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An Empirical Investigation of the Determinants of the Location of Foreign Direct Investment in the Central and Eastern European Countries Using Multilevel Data

Author

Listed:
  • Simona Rasciute

    (Dept of Economics, Loughborough University)

  • Eric J. Pentecost

    (Dept of Economics, Loughborough University)

  • Helena I. Marques

    (Dept of Economics, Loughborough University)

Abstract

This paper employs a novel multi-level data set and a multinomial logit model - to examine the factors explaining 1,223 foreign investment location decisions by firms in the EU(15), Japan, Norway, Russia, Switzerland and the US in 12 Central and Eastern European countries (CEECs). The highly significant empirical results, based on a general underlying model of imperfect competition, show that the responsiveness of foreign direct investment in the CEECs to country-level variables differs significantly both across sectors and across firms of different sizes and profitability. In particular, in addition to the traditional importance of market size and distance, firm size and the effective corporate tax rate are also important for the location of investment.

Suggested Citation

  • Simona Rasciute & Eric J. Pentecost & Helena I. Marques, 2007. "An Empirical Investigation of the Determinants of the Location of Foreign Direct Investment in the Central and Eastern European Countries Using Multilevel Data," Discussion Paper Series 2007_22, Department of Economics, Loughborough University, revised Sep 2007.
    • Handle: RePEc:lbo:lbowps:2007_22
    as

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    File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/MNLpaper.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Multi-level data; foreign direct investment; multinomial logit model;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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