<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The aim of this paper is to examine the factors that explain the observed differences in inward foreign direct investment (FDI) performance between the peripheral southern eurozone countries (namely Greece and Portugal) and the eight Eastern EU members (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia) that joined in 2004. The empirical analysis, which is based on the estimation of a panel-econometric model during the 2004-2016 period, provides for Greece and Portugal policy relevant insights with respect to improving the international competitiveness and attracting more FDI inflows vis-a-vis Eastern EU countries, which have outperformed the two southern eurozone members. The results indicate that, among other factors, positive differences in labour costs and corporate tax rates between southern eurozone members and Eastern EU member states largely explain the observed differences in inward FDI performance among those two country groups. The higher labour costs and corporate taxation in Greece and Portugal exhibit a strong negative impact on their relative inward FDI performance vis-avis Eastern EU members. Furthermore, differences in economic openness and integration into vertical production networks also have a significant effect on inward FDI performance.</p></abstract>

The aim of this paper is to examine the factors that explain the observed differences in inward foreign direct investment (FDI) performance between the peripheral southern eurozone countries (namely Greece and Portugal) and the eight Eastern EU members (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia) that joined in 2004. The empirical analysis, which is based on the estimation of a panel-econometric model during the 2004-2016 period, provides for Greece and Portugal policy relevant insights with respect to improving the international competitiveness and attracting more FDI inflows vis-a-vis Eastern EU countries, which have outperformed the two southern eurozone members. The results indicate that, among other factors, positive differences in labour costs and corporate tax rates between southern eurozone members and Eastern EU member states largely explain the observed differences in inward FDI performance among those two country groups. The higher labour costs and corporate taxation in Greece and Portugal exhibit a strong negative impact on their relative inward FDI performance vis-avis Eastern EU members. Furthermore, differences in economic openness and integration into vertical production networks also have a significant effect on inward FDI performance.

Differences in Inward FDI Performance Between the Southern Eurozone and Eastern EU Members: A Panel-Data Analysis Over 2004-2016

Economic Themes

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

The aim of this paper is to examine the factors that explain the observed differences in inward foreign direct investment (FDI) performance between the...

Differences in Inward FDI Performance Between the Southern Eurozone and Eastern EU Members: A Panel-Data Analysis Over 2004-2016

Published Online: Oct 11, 2019

Page range: 519 - 532

Received: Aug 03, 2018

Accepted: Dec 28, 2018

DOI: https://doi.org/10.2478/ethemes-2018-0030

Keywords
Foreign Direct Investment, Inward FDI performance, Greece, Portugal, Eastern EU member states, Panel-econometric analysis

© 2018 Klimis Vogiatzoglou, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Differences in Inward FDI Performance Between the Southern Eurozone and Eastern EU Members: A Panel-Data Analysis Over 2004-2016

Published Online: Oct 11, 2019

Page range: 519 - 532

Received: Aug 03, 2018

Accepted: Dec 28, 2018

DOI: https://doi.org/10.2478/ethemes-2018-0030

KeywordsForeign Direct Investment, Inward FDI performance, Greece, Portugal, Eastern EU member states, Panel-econometric analysis

© 2018 Klimis Vogiatzoglou, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
Foreign Direct Investment, Inward FDI performance, Greece, Portugal, Eastern EU member states, Panel-econometric analysis