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Ease of doing business and FDI in the ex-socialist countries

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Abstract

This study investigates if ease of doing business, measured through the Doing Business indicators of the World Bank, affects foreign direct investment in 27 ex-socialist countries. Classical and Bayesian econometric techniques are employed. Results point out that there is a lot of uncertainty regarding the effects, with most of the indicators being either insignificant or lacking robustness. The only aspect of the business regulation that stands out as a robust determinant in the two estimations is the ease of trading across borders.

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Notes

  1. “doing business” search (in cyrillic transcription) on www.dnevnik.com.mk on 10 December 2014 gave 160 articles published since 2006, while “Steve Jobs” search (in cyrillic transcription) gave 120. Similar results were obtained on other daily newspapers’ websites.

  2. The dummy for non-zero FDI in 2002-2003 is likely to affect the probability for non-zero FDI in 2008-2011 because of the persistence in the economic relations. On the other hand, the exclusion criterion should also be satisfied, because the amout of FDI flows between two countries in 2008-2011 need not be correlated with the very existence of FDI relations six years ago.

  3. The interquartile ranges for all the variables, as well as other descriptive statistics, can be seen in Table 16 in the Appendix.

  4. e x p(0.22 ∗ 15.5) − 1 = 29.3 . All the other effects are calculated in the same way.

  5. The WGI remain insignificant even when they are included not with their estimate values, but other forms, like the percentile rank, or dummies for high or low values of the indicator.

  6. The Time to Export (tab_time_ex) indicator has been excluded due to a wrong sign, most probably due to high correlation with the Documents to Export (tab_doc_ex) indicator.

  7. The Time to Enforce Contracts (ec_time) indicator has been excluded due to a wrong sign, most probably due to high correlation with the Cost to Enfore Contracts (ec_cost).

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Authors and Affiliations

  1. Institute of Social Sciences and Humanities, Skopje, Republic of Macedonia, and CERGE-EI, Prague, Czech Republic

    Branimir Jovanovic

  2. National Bank of the Republic of Macedonia, Skopje, Republic of Macedonia

    Biljana Jovanovic

Authors
  1. Branimir Jovanovic
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  2. Biljana Jovanovic
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Corresponding author

Correspondence to Branimir Jovanovic.

Appendix

Appendix

Table 14 Variables construction and data sources
Full size table
Table 15 Results of the selection equation
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Table 16 Summary statistics of variables used in the analysis
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Jovanovic, B., Jovanovic, B. Ease of doing business and FDI in the ex-socialist countries. Int Econ Econ Policy 15, 587–627 (2018). https://doi.org/10.1007/s10368-017-0377-3

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