Privatisation and foreign direct investment in 10 transition countries

Bruno Merlevede () and Koen Schoors

Post-Communist Economies, 2009, vol. 21, issue 2, pages 143-156

Abstract: This article uses a partial adjustment framework to examine the determinants of FDI stocks of 'old' EU member states in 10 transition countries that have now joined the EU. A dynamic panel analysis reveals that equilibrium FDI stocks are determined by traditional variables such as market potential and unit labour costs. Adjustment towards equilibrium is rapid. The relationship between FDI and the privatisation process is complex. Whereas direct privatisation strategies positively affect the equilibrium FDI stock, non-direct privatisation schemes negatively affect the speed of adjustment towards the equilibrium. Privatisation history seems to increase equilibrium FDI stocks, independently of the method applied.

Date: 2009
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