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Inflow and Outflow Potentials of Foreign Direct Investment in the Russian Economy: Numerical Estimation Based on the Gravity Approach

Author

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  • Drapkin, I.

    (International Economics of the Graduate School of Economics and Management of the Federal State Autonomous Educational Institution of Higher Professional Education "Ural Federal University named after the first President of Russia B.N. Yeltsin", Yekaterinburg, Russia)

  • Mariev, O.

    (Econometrics and Statistics of the Graduate School of Economics and Management of the Federal State Autonomous Educational Institution of Higher Professional Education "Ural Federal University named after the first President of Russia B.N. Yeltsin", Yekaterinburg, Russia)

  • Chukavina, K.

    (Econometrics and Statistics of the Graduate School of Economics and Management of the Federal State Autonomous Educational Institution of Higher Professional Education "Ural Federal University named after the first President of Russia B.N. Yeltsin", Yekaterinburg, Russia)

Abstract
The aim of this article is to identify and estimate factors that influence on foreign direct investment (FDI) flows in the modern economy. The basis for empirical analysis is the gravity approach to FDI determinants estimation. For the empirical research we use the database for 47 FDI-importers and 112 FDI-exporters over the period from 2001 to 2011. Comparing different econometric techniques we found out that Poisson pseudo-maximum likelihood method provide the most accuracy in estimation of FDI determinants. As a result of econometric estimation we validate base hypotheses of the gravity model: the size of the countries positively affects FDI flows, while the distance between them affects FDI negatively. The additional determinants of FDI flows are identified: the openness of the FDI importing economy, wage level in the FDI-importer, the level of multilateral resistance for both FDI-importer and exporter, common language between investing countries and also colonial connections in the past. Based on the results of the econometric estimation, we calculate potential values of FDI import and export flows in the Russian economy. We found out that the actual value of both FDI inflows and outflows are much lower than potential.

Suggested Citation

  • Drapkin, I. & Mariev, O. & Chukavina, K., 2015. "Inflow and Outflow Potentials of Foreign Direct Investment in the Russian Economy: Numerical Estimation Based on the Gravity Approach," Journal of the New Economic Association, New Economic Association, vol. 28(4), pages 75-95.
    • Handle: RePEc:nea:journl:y:2015:i:28:p:75-95
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    References listed on IDEAS

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    Cited by:

    1. Mariev Oleg Svyatoslavovich & Drapkin Igor Mikhailovich & Chukavina Kristina Vladimirovna & Rachinger Heiko, 2016. "Determinants of FDI inflows: the case of Russian regions," Экономика региона, CyberLeninka;Федеральное государственное бюджетное учреждение науки «Институт экономики Уральского отделения Российской академии наук», vol. 12(4), pages 1244-1252.

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    More about this item

    Keywords

    determinants of foreign direct investment; gravity model of foreign direct investment; Poisson pseudo-maximum likelihood method;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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