The Determinants of Foreign Direct Investment in the CEECs: New evidence from sectoral patterns
Abstract
This paper investigates the determinants of European Union FDI in the CEECs at sectoral level. The aim is to understand whether and to what extent FDI undertaken in different sectors reacts to the characteristics of the host countries. The analysis is based on a dataset created specifically for this purpose. It concentrates on the manufacturing sectors, classified according to the Pavitt taxonomy. Firstly, data summarizing the recent trend of FDI in the CEECs is presented and then empirical evidence given to account for differences between sectors. The estimated model is a generalization of a three‐way fixed effect model incorporating ‘classic’ variables, such as labour costs as well as country‐specific variables, i.e., the stage reached in the transition process. The results confirm the presence of heterogeneity at sector level.