Location of foreign firms and national border effects: The case of poland

This paper investigates the importance of border effects for the location of foreign firms within Poland using a regional data set for the 1990s. In contrast to previous studies the border effects are estimated for individual neighbouring countries that belong to two groups: EU member countries and EU non-accessing countries. It is shown that border dummies for three EU non-accessing countries: Belarus, Russia and Ukraine are negative and statistically significant. These results suggest that regions located along the Polish segment of the Eastern frontier of the enlarged European Union are less attractive to foreign investors compared to other Polish regions, having controlled for their economic and social characteristics. This finding has important implications for the conduct of regional policy as public aid or special economic status may be necessary for these disadvantaged regions to prevent uneven regional growth and widening of development disparities within Poland.