Working Paper

Foreign Direct Investment in Central and Eastern European Countries: A Dynamic Panel Analysis

Kiel Working Papers, 1143

This paper uses dynamic panel data methods to examine the determinants of Foreign Direct Investment (FDI) into Central and Eastern European Countries (CEECs). Our empirical model shows that the traditional determinants, such as market potential, low relative unit labor costs, a skilled workforce and relative endowments have significant and plausible e®ects. In addition, transition-specific factors such as the level and method of privatisation, and the country risk, play an important role in determining the flows of FDI into the CEECs and help explain the di®erent attractiveness for FDI of the individual countries.


Kai Carstensen
Farid Toubal


Publication Date
JEL Classification
F21, F23, P33