Agglomeration and Determinants of Foreign Direct Investment in Transition Economies

Posted: 14 Oct 2001

See all articles by Nauro F. Campos

Nauro F. Campos

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

Yuko Kinoshita

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

Date Written: June 2001

Abstract

The objective of this paper is to investigate the determinants of foreign direct investment inflows in the transition economies between 1990 and 1998. The paper brings two innovations. One is the attention to the effect of agglomeration, an issue that has been highlighted recently in the works of Economic Geography. The second innovation is that we look at all transition countries instead of focusing on, for instance, EU candidates. We find that the main determinants of FDI in transition are agglomeration, the quality of the bureaucracy and the quality of infrastructure. We also find an important difference between CEE and CIS countries. The agglomeration effect is greater for CIS countries than in non-CIS countries. For non-CIS countries, education, infrastructure, and quality of bureaucracy are the main attractors. For CIS countries, availability of cheap labor and sufficient infrastructure, and abundance of natural resources are the main factors influencing FDI flows. Also, the further away from Germany, the more FDI CIS countries receive.

Suggested Citation

Campos, Nauro F. and Kinoshita, Yuko, Agglomeration and Determinants of Foreign Direct Investment in Transition Economies (June 2001). Available at SSRN: https://ssrn.com/abstract=285404

Nauro F. Campos (Contact Author)

University College London ( email )

Gower Street
London, WC1E 6BT
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University of Michigan at Ann Arbor - The William Davidson Institute

724 E. University Ave.
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Ann Arbor, MI 48109-1234
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Yuko Kinoshita

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States
202-623-5442 (Phone)
202-623-6069 (Fax)

University of Michigan, William Davidson Institute

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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