The Location of Foreign Direct Investment in the Central and Eastern European Countries: A Nested Logit and Multilevel Data Approach
Simona Rasciute () and
Eric Pentecost ()
Discussion Paper Series from Department of Economics, Loughborough University
This paper generalizes the existing empirical literature on the determinants of the location of FDI, using a nested logit (NL) model and a novel three-level dataset to examine the factors explaining 1,108 foreign investment location decisions into 13 Central and Eastern European countries (CEECs) between 1997 and 2007. The NL model relaxes the multinomial logit model assumption of independence of identically distributed error terms and allows for testing if national boundaries affect the investment location choices of MNEs in the CEECs. In contrast to the existing empirical literature on the investment location choices, the Heteroskedastic Extreme Value model is used as a tool to reveal an appropriate nesting structure. The highly significant empirical results, based on a general underlying economic model of imperfect competition, show that the responsiveness of FDI in the CEECs to country-level variables differs both across sectors and across firms of different sizes and profitability. Hence the results of previous studies that used only country-level data or only industry- and firm-level data may be misleading.
Keywords: Nested logit model; foreign direct investment; multi-level data; heteroskedastic extreme value model (search for similar items in EconPapers)
JEL-codes: F23 P33 (search for similar items in EconPapers)
Date: 2007-12, Revised 2007-12
New Economics Papers: this item is included in nep-dcm, nep-eec and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/Nested_Logit.pdf [301 Moved Permanently]--> https://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/Nested_Logit.pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:lbo:lbowps:2007_29
Access Statistics for this paper
More papers in Discussion Paper Series from Department of Economics, Loughborough University Contact information at EDIRC.
Bibliographic data for series maintained by Huw Edwards ().