Foreign direct investments in Europe: are the East-West differences still so noticeable?

Abstract

This article strives to successively compare the FDI determinants in the former EU-15 and in the CEECs in order to analyze the possible differences between the two areas. The econometric analysis, led over the 1993-2010 period, shows that over that period few noticeable differences can be observed between the two areas, with the traditional effects of market size and openness remaining as factors of attraction in either side of Europe. However, some differences keep up on the role played by the technological gap as well as the wage and the tax system costs variables. The estimates also show that the workforce education level also matters. The results bring out an evolution of the determinants in time suggesting that the social and mainly tax system competitiveness show up on the technological gap. This coincides with the crisis occurrence which generates a greater volatility in FDI flows.