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Contrasting the dynamic patterns of manufacturing and service FDI: Evidence from transition economies

Riedl, Aleksandra (2008) Contrasting the dynamic patterns of manufacturing and service FDI: Evidence from transition economies. Department of Economics Working Paper Series, 117. Inst. für Volkswirtschaftstheorie und -politik, WU Vienna University of Economics and Business, Vienna.

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Abstract

We contribute to the foreign direct investment (FDI) literature by providing first empirical evidence on the relative importance of location fac- tors for service and manufacturing FDI. This is of particular interest as the global stock of inward FDI in the service sector has become predominant in the last ten years. Based on a sectoral panel of eight new European member states in the period of 1998 to 2004 we perform a dynamic panel analysis al- lowing for individual adjustment periods across sectors. Results support our assumption that investment into the service sector, which is characterized by low installation costs, adjusts much faster to its desired level than manufactur- ing FDI. Furthermore, since services are mostly non-tradable, FDI into this sector is largely based on market-seeking motives while manufacturing FDI is also driven by international price competitiveness measured via real unit labor costs. (author´s abstract)

Item Type: Paper
Keywords: foreign direct investment / service sector / stock adjustment model / transition economies
Classification Codes: JEL C23, F21, P33 ; RVK QM 355
Divisions: Departments > Volkswirtschaft
Depositing User: Repository Administrator
Date Deposited: 18 Feb 2008 18:35
Last Modified: 17 Aug 2015 10:40
URI: http://epub.wu.ac.at/id/eprint/1550

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