Three empirical essays on determinants of industry and investment location patterns in the context of economic transition and regional integration : the evidence from Central and Eastern European countries

Abstract

The factor determinants of industry and investment location patterns in transition economies can be expected to differ from those frequently observed in developed countries. Historically, centrally planned economies have suffered from inefficient industrial policies that are generally assumed to have had distortive effects on spatial location of industry. The process of economic transition and regional integration that followed the demise of socialist structures is assumed to have subsequently affected the geographical distribution of economic activities within and between countries of the region. Given the above this thesis capitalises on the quasi-natural experiment setting to further explore industry and investment location decisions in transition economies. In particular, the research presented here follows three main objectives. First, it intends to provide a comprehensive picture of changes in industry location patterns over time. Second, it aims to contribute to the debate on factor determinants of industry location at various levels of spatial aggregation. Third, it seeks to explore location determinants of foreign direct investors in particular, given their pivotal role for economic development of transition economies. In all instances, the research is geared towards a better understanding of the role of institutional factors, such as reforms and policies, in affecting distribution of economic activity across space. Thus, the work conducted qualifies as a further contribution to the analysis of structural changes that have affected the economies under examination. In broad terms, the findings presented here point towards significant changes in spatial location patterns of industry and investments that are leading to increased polarisation of economic landscape over time. Nonetheless, we find evidence that certain institutional factors qualify as viable policy levers, thereby providing ample scope for policy makers to impact existing location patterns of economic activity.