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An Empirical Investigation of the Determinants of the Location of Foreign Direct Investment in the Central and Eastern European Countries Using Multilevel Data

Simona Rasciute (), Eric Pentecost () and Helena Marques

Discussion Paper Series from Department of Economics, Loughborough University

Abstract: This paper employs a novel multi-level data set and a multinomial logit model - to examine the factors explaining 1,223 foreign investment location decisions by firms in the EU(15), Japan, Norway, Russia, Switzerland and the US in 12 Central and Eastern European countries (CEECs). The highly significant empirical results, based on a general underlying model of imperfect competition, show that the responsiveness of foreign direct investment in the CEECs to country-level variables differs significantly both across sectors and across firms of different sizes and profitability. In particular, in addition to the traditional importance of market size and distance, firm size and the effective corporate tax rate are also important for the location of investment.

Keywords: Multi-level data; foreign direct investment; multinomial logit model (search for similar items in EconPapers)
JEL-codes: F23 P33 (search for similar items in EconPapers)
Date: 2007-09, Revised 2007-09
New Economics Papers: this item is included in nep-dcm, nep-eec and nep-tra
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