A service provided by the WU Library and the WU IT-Services

Taxes and infrastructure as determinants of Foreign Direct Investment in Central and Eastern European Countries revisited: New evidence from a spatially augmented gravity model

Leibrecht, Markus and Riedl, Aleksandra (2010) Taxes and infrastructure as determinants of Foreign Direct Investment in Central and Eastern European Countries revisited: New evidence from a spatially augmented gravity model. Discussion Papers SFB International Tax Coordination, 42. WU Vienna University of Economics and Business, Vienna.

[img] PDF
Download (363Kb)

Abstract

A bulk of empirical literature has emerged that explores the role of various location factors as determinants of Foreign Direct Investment (FDI) in Central and Eastern European Countries (CEECs). A notable feature of these studies is that their empirical approaches abstract from third-country (spatial) effects in FDI across the home and host country dimensions. Neglecting these effects could bias results concerning the role of location factors for attracting FDI. This in turn may lead to misguided economic policy conclusions. The current paper adds to the literature by applying the recently proposed spatial "origin-destinationow model" of LeSage and Pace (2008) to FDI ows from 7 Western OECD home countries to 8 CEE host countries. Controlling for country-pair and time effects our results indicate that (a) spatial interactions across the host country dimension matter for FDI revealing that vertical complex FDI ows dominate total FDI ows to CEECs; (b) spatial autocorrelation in the home country dimension is absent; (c) results of previous studies remain valid as coefficient estimates on location factors change only slightly when spatial interdependencies are considered and (d) effective corporate income taxes and the endowment with production-related material infrastruc- ture are statistically and economically signifficant determinants of FDI in CEECs. (author's abstract)

Item Type: Paper
Keywords: foreign direct investment / taxation / spatial econometrics / Osteuropa / Direktinvestition / Standortfaktor / Unternehmen / Steuerrecht / Infrastruktur
Classification Codes: RVK QG 470, QM 355 ; JEL C32, C33, F21, F23, H25, H32, H54
Version of the Document: Published
Variance from Published Version: None
Depositing User: Astrid Mathias
Date Deposited: 14 Dec 2010 13:29
Last Modified: 10 May 2015 04:08
URI: http://epub.wu.ac.at/id/eprint/2949

Actions

View Item