How to Catch Foreign Fish? FDI and Privatization in EU Accession Countries

26 Pages Posted: 23 May 2006

See all articles by Bruno Merlevede

Bruno Merlevede

Ghent University - Department of General Economics

Koen J. L. Schoors

Ghent University - Centre for Russian International Socio-Political and Economic Studies (CERISE); Ghent University - Department of General Economics

Date Written: August 2005

Abstract

We examine the determinants of FDI stocks of 'old' EU-members in ten accession countries. Our partial adjustment framework results in a dynamic panel data analysis. In addition to the traditional variables, such as market potential and unit labour costs, we find institutional development to be a robust determinant of equilibrium FDI stocks. The adjustment towards equilibrium is rapid. The relationship between FDI and the privatization process is complex. Non-direct privatization schemes negatively affect the speed of adjustment, whereas direct privatization strategies positively affect the equilibrium itself. Privatization history increases equilibrium FDI stocks, independently of the method applied.

Keywords: foreign direct investment, privatisation, partial adjustment

JEL Classification: F20, F23, P33

Suggested Citation

Merlevede, Bruno and Schoors, Koen J. L., How to Catch Foreign Fish? FDI and Privatization in EU Accession Countries (August 2005). William Davidson Institute Working Paper No. 785, Available at SSRN: https://ssrn.com/abstract=903799 or http://dx.doi.org/10.2139/ssrn.903799

Bruno Merlevede

Ghent University - Department of General Economics ( email )

Tweekerkenstraat 2
Ghent, 9000
Belgium

Koen J. L. Schoors (Contact Author)

Ghent University - Centre for Russian International Socio-Political and Economic Studies (CERISE) ( email )

Tweekerkenstraat 2
Ghent, 9000
Belgium
+32 9 264 34 78 (Phone)
+32 9 265 35 99 (Fax)

Ghent University - Department of General Economics ( email )

Tweekerkenstraat 2
Ghent, 9000
Belgium
+32 9 264 34 78 (Phone)
+32 9 264 35 99 (Fax)

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