Ways of Attracting FDI in Western and Eastern European Countries: Upgrading Institutions’ Quality
Ways of Attracting FDI in Western and Eastern European Countries: Upgrading Institutions’ Quality

Summary/Abstract: The present paper assesses the quality of institutions as a determinant for attracting foreign direct investments (FDI). The quality of institutions is related to the recent bilateral principles for the international investment environment developed between the European Union (EU) and the United States (US). We establish significant variables for quantifying the institutions’ quality and we compose an institutions quality index. Based on this index, we measure the institutions’ quality in four Western European (WE) countries and in five Eastern European (EE) countries. We find that there is a gap between the two group of countries and that the WE countries are more performant in terms of institutions’ quality, but the EE countries have a strong instrument at hand for increasing FDI inflows.

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