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Spatial complementarity of FDI: example of transition countries

Oleksandr Shepotylo ()

No 29, Discussion Papers from Kyiv School of Economics

Abstract: This paper investigates spatial determinants of FDI location. In particular, FDI in neighboring countries and foreign market potential are two variables it focuses on. The sample includes a panel of 27 transition countries in 1993-2007. The spatial links are found positive and economically large. Omitting spatial FDI leads to a serious misspecication of the model and biases estimation of the coecient of the foreign market potential variable, which is found to be a non-robust determinant of FDI location. As the analysis of sub-samples of the data indicates, the FDI complementarity is stronger for the CIS countries and for earlier period. The spatial complenmentarity is stronger for disaggregated data such as bilateral FDI flows and industry level data. I nd substantial heterogeneity of spatial FDI spillovers across indus- tries. Spillovers are large and positive for services sectors and non-sighicant or even negative for manufacturing sectors.

Keywords: foreign direct investments; spatial econometrics; transition (search for similar items in EconPapers)
JEL-codes: C21 F21 P33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-int and nep-tra
Date: 2010-06
Note: Submitted to European Economic Review
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http://repec.kse.org.ua/pdf/KSE_dp29.pdf June 2010 (application/pdf)

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