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Factor Endowments, Economic Integration, Round-Tripping, and Inward FDI: Evidence from the Baltic Economies

Andrzej Cieślik and Oleg Gurshev
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Oleg Gurshev: Department of Macroeconomics and International Trade Theory, Faculty of Economic Sciences, University of Warsaw, ul. Długa 44/50, 00-241 Warszawa, Poland

JRFM, 2021, vol. 14, issue 8, 1-26

Abstract: This paper studies the location choice of foreign multinational firms in the Baltic economies of Estonia, Latvia, and Lithuania using a knowledge-and-physical capital model across 2004–2017. We used the Bayesian model averaging estimation method to investigate a set of possible factors that drive inward FDI. Our analysis demonstrates that factor endowments play a dominant role in driving vertical foreign direct investment, while external market barriers generate “tariff-jumping” FDI. Our analysis quantifies the effects of round-trip FDI, European integration, and external bilateral free trade agreements vis-à-vis inward FDI in the Baltics.

Keywords: Baltic economies; foreign direct investment; Bayesian model averaging; factor endowments; round-trip investments (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
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