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Foreign Direct Investment: Agglomeration Economies and Returns to Promotion Expenditures

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  • Kim, Seong-Hee

    (U WY)

  • Pickton, Todd S.

    (U WY)

  • Gerking, Shelby

    (U Central FL)

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    Abstract

    The effect of a state's financial incentives to attract foreign direct investments (FDI) is a frequent topic for both economists and policy makers. Many studies have shown that FDI are disproportionately concentrated in states with agglomeration economies. This paper uses a conditional logit model with FDI (new plants) data from 1987-1994 to explore the relationship between state efforts, state characteristics, and FDI attraction. Key results show that both promotion expenditures and agglomeration economies are important in attracting foreign plants. Results also indicate that promotion expenditures by states with small economies can partially offset location disadvantages of agglomeration (urbanization and/or localization) economies and thus appear to be a useful economic development tool as states compete for investment.

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    Bibliographic Info

    Article provided by Southern Regional Science Association in its journal Review of Regional Studies.

    Volume (Year): 33 (2003)
    Issue (Month): 1 ()
    Pages: 61-72

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    Handle: RePEc:rre:publsh:v:33:y:2003:i:1:p:61-72

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    Web page: http://www.srsa.org

    Related research

    Keywords: FDI; Foreign Direct Investment; Policy;

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    Cited by:
    1. Nils Herger & Christos Kotsogiannis & Steve McCorriston, 2011. "International Taxation and FDI Strategies: Evidence From US Cross-Border Acquisitions," Discussion Papers 1109, Exeter University, Department of Economics.
    2. Tapio Palokangas, 2009. "Investment, expropriation, and unionization," Economics of Governance, Springer, vol. 10(1), pages 27-42, January.
    3. Neil Foster-McGregor & Robert Stehrer, 2008. "Sectoral Productivity, Density and Agglomeration in the Wider Europe," wiiw Working Papers 47, The Vienna Institute for International Economic Studies, wiiw.
    4. Jonathan Jones & Colin Wren, 2008. "Re-Investment and the Survival of Foreign-Owned Plants," SERC Discussion Papers 0003, Spatial Economics Research Centre, LSE.
    5. Jonathan Jones & Colin Wren, 2008. "Re-investment and the survival of foreign-owned plants," LSE Research Online Documents on Economics 33138, London School of Economics and Political Science, LSE Library.
    6. Siedschlag, Iulia & Smith, Donal & Turcu, Camelia & Zhang, Xiaoheng, 2009. "What Determines the Attractiveness of the European Union to the Location R&D Multinational Firms?," Papers DYNREG46, Economic and Social Research Institute (ESRI).
    7. Jonathan Jones & Colin Wren, 2009. "The Dynamics of FDI Location: A Markov Analysis for British Regions," SERC Discussion Papers 0035, Spatial Economics Research Centre, LSE.
    8. Kandogan, Yener, 2012. "Regional foreign direct investment potential of the states within the US," Journal of Economics and Business, Elsevier, vol. 64(4), pages 306-322.
    9. Wren, Colin & Jones, Jonathan, 2009. "Re-investment and the survival of foreign-owned plants," Regional Science and Urban Economics, Elsevier, vol. 39(2), pages 214-223, March.
    10. Jonathan Jones & Colin Wren, 2009. "The dynamics of FDI location: a markov analysis for British regions," LSE Research Online Documents on Economics 33497, London School of Economics and Political Science, LSE Library.
    11. Nils Herger, 2013. "On Discrete Location Choice Models," Working Papers 13.02, Swiss National Bank, Study Center Gerzensee.
    12. Jonathan Jones & Colin Wren, 2008. "FDI location across British regions and inward investment policy," LSE Research Online Documents on Economics 33204, London School of Economics and Political Science, LSE Library.
    13. Rasciute, Simona & Pentecost, Eric J., 2010. "A Nested logit approach to modelling the location of foreign direct investment in the Central and Eastern European Countries," Economic Modelling, Elsevier, vol. 27(1), pages 32-39, January.
    14. Colin Wren & Jonathan Jones, 2011. "Assessing The Regional Impact Of Grants On Fdi Location: Evidence From U.K. Regional Policy, 1985–2005," Journal of Regional Science, Wiley Blackwell, vol. 51(3), pages 497-517, 08.
    15. Jonathan Jones & Colin Wren, 2008. "FDI Location Across British Regions and Inward Investment Policy," SERC Discussion Papers 0013, Spatial Economics Research Centre, LSE.

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