Inter- and intra-industry linkages as a determinant of FDI in Central and Eastern Europe

Abstract

This paper uses an unpublished dataset on disaggregated foreign direct investment (FDI) in Central and Eastern European countries (CEECs), and is rooted in new economic geography literature. A 10% increase in access to suppliers based in the FDI recipient country or access to the EU15 market for intermediate goods increases FDI by about 2% in Central European countries and by 1% in Eastern European countries. We argue that Central (core) European countries specialise in upstream industries and re-export goods toward FDI-origin countries, while Eastern (periphery) European countries are also involved in this production chain, but to a lesser extent.