Date of Award

Spring 2018

Document Type

Honors Thesis



First Advisor

Dr. David Carr

Second Advisor

Dr. Mike Allgrunn

Third Advisor

Dr. Timothy Schorn


Estonia, Foreign Direct Investment, Economic Development


In the second half of the twentieth century, many countries were able to experience tremendous economic growth by allowing for an influx of foreign investment. One such country, and the focus of this paper, is the small Baltic nation of Estonia. Under Soviet control from 1940 to 1991, Estonia existed as a closed economy, with the little trade that did occur staying mainly within the Soviet Union. After gaining independence, Estonia took measures to open their economy with the chief of these measures being policies that encouraged investment from outside firms and nations. The country realized that with a population of just over a million people, the best way to spur economic growth was to allow for foreign investors to develop the country’s capital stock. This investment allowed for Estonia to increase their presence in international markets, further aiding in their transition to a developed economy. In the period following their induction to the European Union when the greatest amount of foreign direct investment was received, to 2016, Estonia has had their real GDP per Capita rise from 47% of the European Union average to 73%, and the value of exports has risen from $2.1 billion to $13.9 billion. Foreign direct investment has played a central role in Estonia’s development and the purpose of this paper is to report on the effects of foreign direct investment in Estonia from its post-Soviet transition to the modern day.



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