FOREIGN DIRECT INVESTMENTS DISTRIBUTIONIN THE RUSSIAN FEDERATION:DO SPATIAL EFFECTS MATTER?

In this paper we explore the hypothesis of spatial effects in the distribution of ForeignDirect Investments (FDI) across Russian regions. We make use of a model, whichdescribes FDI inflows as resulting from an agglomeration effect (the level of FDI in agiven region depends positively on the level of FDI received by the regions in itsneighbourhood) and remoteness effect (the distance of each Russian regions from themost important outflows countries). Considering a panel of 68 Russian regions over theperiod 2000-2004 we find that the two effects play a significant role in determining FDIinflows towards Russia. The two effects are also robust to the inclusion of other widelyused explanatory variables impacting the level of FDI towards countries or regions (e.g.surrounding market potential, infrastructures, investment climate)....