REGIONAL COOPERATION AND ECONOMIC INTEGRATION

FDI FLOWS IN SOUTH EASTERN EUROPE
On the basis of the data for the above mentioned variables for the period 1999-2007 and
by applying the econometric software package EViews 6, we have obtained the following
results:
Table 2: Determinants of FDI: Dependent variable= FDI stock per capita in year t
variable Model 1 Model 2 Model 3 Model 4 Model 5
LOG(GDPPC)
WAGEDIF
LOG(DIST)
LOG(MOBILE)
0.544284
(0.158372) ***
0.000577
(0.000141) ***
-1.784674
(0.314970) ***
0.406643
(0.096818)***
0.534746
0.164444***
0.000569
0.000188***
-1.217531
0.783777
0.380709
0.106024***
-0.005045
0.304262
0.000567
0.000174***
-0.790082
0.754567
0.245301
0.118284*
0.152342
0.295630
0.000222
0.000322 *
0.601180
0.934152
0.258726
0.295341
-0.162915
0.322514
0.000211
0.000298
0.128269
0.900880
0.303610
0.274075
SECONDARY
CPI
LOG(TROPEN)
RANKING
LOG(FDIPC(-1))
NEG
0.007332
(0.024770)
0.002866
0.027337
-0.001726
0.004300
0.723016
0.905690
0.010321
0.025552
0.002953
0.004587
0.007846
0.019725
0.042107
0.020554*
0.004429
0.022699
-0.000567
0.004731
1.792446
0.998653*
0.003639
0.023487
0.382394
0.193472*
0.004923
0.020983
-0.001824
0.004426
1.421671
0.944801
0.012692
0.022260
0.322671
0.181750*
0.327494
0.177960*
Adjusted R 2 0.940018 0.935857 0.945095 0.952488 0.959408
Standard errors are presented in brackets below coefficients. ***,**,*, indicate statistical
significance at level of 1%, 5% and 10% respectively.
How are the above obtained econometric results interpreted
The model (1) in the second column of Table 2e explains the variations of FDI stock
per capita as a result of the classical FDI determinants. This model shows that market
size expressed as GDP per capita, labour costs, transportation costs and infrastructure play
important role in attracting FDI from EU to the EU candidate countries. When it comes to
labour costs, a negative correlation is found between wage difference as a proxy for labour
costs and FDI in our model which is consistent with the theoretical expectations that FDI is
driven by lower labour costs. This is in case when vertical FDI is dominant. The coefficient
of the variable secondary school enrolment rate is not statistically significant, so that we
can conclude that FDI in these countries are not looking for skilled workers, but are mainly
driven by cheap labour force. The distance (DIST) confirms the former expectations i.e.
it affects inversely the level of FDI. In the estimated model, the coefficient of the variable
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