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Foreign Direct Investment in Central Europe and Differences in Transition between post- communist Central European Economies

©2010 Masterarbeit 60 Seiten


The transition process from a centrally planned to a market economy followed a very different path in East Germany compared to all other former communist countries. The German Democratic Republic acceded the Federal Republic of Germany in 1990, while other former socialist countries in Central and Eastern Europe (CEE) had to start from square one after becoming independent from the USSR. In contrast to other post-soviet countries, East Germany subsequently received massive transfers from the Western part of the country. A significant part of these transfers was invested into infrastructure improvement, while a larger share was spent for consumption, raising the purchasing power in the East of Germany, allowing it to sustain a higher wage level and living standard than would have been economically possible without aid from the West.
Twenty years after the breakdown of the iron curtain and the reunification of Germany, the infrastructure in the Eastern part of the country is en par with the West. The East German wage level remains only slightly lower than the Western level (as does productivity), but is significantly higher than in neighbouring post-communist CEE-countries. Because of these differences in economic transition, it can be expected that East Germany attracts a different kind of foreign direct investment compared to other CEE-countries. The objective of this dissertation is to empirically identify the factors affecting foreign direct investment into the region and to discuss the implications of the empirical findings for regional and national economic policy. The ‘region” is represented in this paper by East Germany and three of its Central-European neighbour-countries, the Czech Republic, Poland and Hungary.
The present study is organised as follows: A brief historical overview of the four economies’ transition processes will be given in chapter 2. The theoretical background, the methodology and the dataset used are being discussed in section 3. Hypotheses derived from the region’s history, economic theory and previous literature on foreign direct investment will be presented in section 4. In section 5 they will be tested and the econometric results identifying the factors affecting foreign investors’ investment decisions in Central Europe will be discussed. Finally, the main empirical findings and their political implications will be summarised in the concluding chapter […]


ISBN (eBook)
1.8 MB
Institution / Hochschule
University of Warwick – Economics
2010 (November)
central europe foreign direct investment transition economic geography

Titel: Foreign Direct Investment in Central Europe and Differences in Transition between post- communist Central European Economies