Spatial Inequality, Foreign Investment, and Economic Transition in Bulgaria∗

∗Support for this research was provided by National Science Foundation grant INT-9021910. I thank Robert B. Begg and two anonymous reviewers for comments on an earlier draft, Dimitrina Mikhova and other members of the Bulgarian Institute of Geography for assistance with fieldwork, and Robert P. Sechrist and Robert E. Wilson for cartographic assistance.

Abstract

This study analyzes the possibility of increased regional economic inequality in Bulgaria following the collapse of Soviet-style Communism, which promoted spatial egalitarianism in development policies. Spatial equilibrium (neoclassical) and spatial concentration (cumulative causation) models of regional development in market economies suggest different trends. International investments reported in Business Eastern Europe from 1989 through 1992 are analyzed to test the hypothesis that regional inequalities are increasing as the cumulative causation school suggested they would. Analysis of date, location, type of transaction, and sector variables reveals Sofia's development as a service center and sectoral changes that may have regional implications if the pace of foreign investment quickens. The evidence fails, however, to refute the neoclassical spatial equilibrium model and also fails to dispel the possibility that residual influences of Communist policies are discouraging foreign investment and preventing market-driven spatial adjustments.

Key Words:

• Bulgaria
• Eastern Europe
• international investment
• regional development
• spatial concentration

Notes

∗Support for this research was provided by National Science Foundation grant INT-9021910. I thank Robert B. Begg and two anonymous reviewers for comments on an earlier draft, Dimitrina Mikhova and other members of the Bulgarian Institute of Geography for assistance with fieldwork, and Robert P. Sechrist and Robert E. Wilson for cartographic assistance.