Foreign Direct Investment in Southeastern Europe

Gravity factors explain a large part of Foreign Direct Investment (FDI) inflows in Southeastern Europe-a region not comprehensively covered before in econometric studies-but hostcountry policies also matter. Key are policies that affect relative unit labor costs, the corporate tax burden, infrastructure, and the trade regime. This paper develops the concept of potential FDI for each country, and uses its deviation from actual levels to estimate what policies can realistically be expected to achieve in terms of additional FDI. It also finds evidence that above a certain threshold, the importance of some policies for attracting FDI is distinctly different.Foreign direct investment;Transition economies;fdi, direct investment, host country, foreign investment, foreign investors, investors, foreign exchange, host countries, tax incentives, income tax rate, tax rate, market size, corporate tax burden, corporate tax, foreign companies, international investors, foreign ? investment, multinational firms, tax policy, institutional development, international investment, investment decisions, international trade, multinational enterprises, industrial economies, commercial disputes, bilateral investment, host economy, direct investment statistics, technology transfer, tax relief, macroeconomic stability, accelerated depreciation, foreign-owned firms, corporate taxes, host-country, investment environment, tax regime, economic zones, special economic zones, multinational companies, bilateral investment treaties