INSTITUTIONAL DETERMINANTS OF FOREIGN DIRECT INVESTMENT FLOWS IN TRANSITION ECONOMIES
INSTITUTIONAL DETERMINANTS OF FOREIGN DIRECT INVESTMENT FLOWS IN TRANSITION ECONOMIES

Summary/Abstract: This paper tests the institutional determinants of Foreign Direct Investment flows to 5 South East European Countries (SEEC-5) and the 10 New Member States of the European Union countries (EU-NMS-10) by using panel data set for a time span 1994-2018. The study employs an augmented Gravity Model with country specific institutional factors which determine foreign investors’ decisions from 14 core European Union countries to invest into SEE-5 and EU-NMS-10 countries. From the results of the study we found that FDI flows are significantly influenced by both gravity factors (distance, GDP) and non-gravity, mainly efficiency seeking factors (bilateral exports, schooling), as well as institutional factors like: WTO membership, transition progress and governance indicators of rule of law, regulatory quality and political risk

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