Date post: | 18-Dec-2014 |
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Foreign Direct Investment
and Institutional Environment
in Transition Economies
Henry Sichel Doing business in C.E.E. Elizabeth Pyle Wirtschaftuniversitaet - Wien
Industrialized economies
Transition economies
Positive externalities
Human capital intensification
Technological diffusion
Profits
Corporate growth
Henry Sichel Doing business in C.E.E. Elizabeth Pyle
Determinants of FDIs inflows
Quality of the Institutional framework
Private property rights
Law of contracts
Strong and limited government role
Generally
Quality of regulation
Formal institutions development
Perceived risk
Intellectual property protection
In transition economies…
I – The evolution Central- Baltic
South-East
Former U.S.S.R
% o
f to
tal F
DIs
1992 2004
Henry Sichel Doing business in C.E.E. Elizabeth Pyle
Slow down in privatizations
Increase in net outflows
Repayments
Acceleration in privatizations…
Increase in trust
… and greenfield investments
Oil
Retail
II – Why?
Henry Sichel Doing business in C.E.E. Elizabeth Pyle
III – The Impact
Beyond FDIs, other influential variables
Long-run growth • Gross fixed capital; • Labour; • Human capital
Short-run movements • Inflation; • Budget deficit
Dependent variable: GDP per capita
Per
cap
ita
GD
P
FDIs
+
-
1° Regulation
2° Property rights protection
3° Black market existance
4° Capital mobility
5° Wages level
IV – Which are the drivers?
Finding out the different aspects of Institutional Quality
Economical aspects
Legal aspects FDIs
climate
Based on the Heritage Foundation 10 variables- Index
V –FDIs climate… and what else?
1° FDIs climate
2° Budget deficits
3° Typology of privatizations
4° Labour costs (positive effect!)
Henry Sichel Doing business in C.E.E. Elizabeth Pyle