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Original scientific paper

Institutional Development as a Determinant of FDI Attractiveness in Southeast Europe

Ines KERSAN-ŠKABIĆ orcid id ; Juraj Dobrila University of PulaDepartment of Economics and Tourism

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page 215-235

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The aim of this paper is to research the institutional
environment in SEE countries (Albania, Bosnia and
Herzegovina, Bulgaria, Croatia, Macedonia, Montenegro,
Romania and Serbia) and its importance in attracting FDI
inflows. Several regression models are created to determine
the significance of chosen location determinants. The models
include institutional variables about the transition progress,
government effectiveness, rule of law, corruption, but also
variables about the economic characteristics of the SEE
region such as GDP per capita, growth rate, inflation and
wages. The results of the panel data analysis indicated the
importance of economic determinants (GDP p.c. and
inflation) to FDI inflows, while among institutional factors,
only corruption, large scale privatisation, the development of
trade and forex systems, and overall infrastructure reform
have a significant impact on FDI inflows. Property rights
freedom and small scale privatisation are not significant
variables. When we reduce multicollinearity, we
conclude that GDP p.c., inflation, the trade and
forex systems, corruption and overall infrastructure
reform remain significant variables in explaining the
economic and institutional determinants of FDI inflows.


institutional development; FDI; SEE region

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