Discussion Paper Details

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Title: Why Does FDI Go Where it Goes? New Evidence from the Transitional Economies

Author(s): Nauro F. Campos and Yuko Kinoshita

Publication Date: July 2003

Keyword(s): foreign direct investment and transition economies

Programme Area(s): International Trade and Regional Economics and Transition Economics

Abstract: This Paper examines the importance of agglomeration economies and institutions vis--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 1990-98, 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.

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Bibliographic Reference

Campos, N and Kinoshita, Y. 2003. 'Why Does FDI Go Where it Goes? New Evidence from the Transitional Economies'. London, Centre for Economic Policy Research.