Distribution of Foreign Direct Investment among Transition Economies in Central and Eastern Europe

Abstract

This paper presents a regression model designed to explain the distribution of foreign direct investment (FDI) in the countries of Central and Eastern Europe. Locational variables are identified from geography and economics literatures on location theory and foreign direct investment. The dependent variable is cumulative value of investments in each host country, accounting for initial outlays as well as subsequent investments and reinvested profits. The results identify the most important determinants of FDI in the region (trade volume, followed by investment climate and density of transportation infrastructure).