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FDI Location Across British Regions and Inward Investment Policy

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  • Jonathan Jones
  • Colin Wren

Abstract

The theory and empirical evidence on FDI location emphasise agglomeration economies over classical location factors, such as grants. This paper uses panel data to analyse the effect of the main instrument of inward investment policy, the UK regional policy grants, on the distribution of FDI projects across British regions over 1985-05. Using a GMM estimator the paper finds grants have a significant effect on FDI, even when agglomeration terms are included, but that its effect diminished over the 1990s. This is attributed to a redrawing of the eligible areas map. It concludes that in relation to foreign investment regional policy is no longer able to affect the regional distribution of FDI, so the grants are an instrument of national development policy.

Suggested Citation

  • Jonathan Jones & Colin Wren, 2008. "FDI Location Across British Regions and Inward Investment Policy," SERC Discussion Papers 0013, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:sercdp:0013
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    Cited by:

    1. Carfora, Alfonso & Romano, Antonio A. & Ronghi, Monica & Scandurra, Giuseppe, 2017. "Renewable generation across Italian regions: Spillover effects and effectiveness of European Regional Fund," Energy Policy, Elsevier, vol. 102(C), pages 132-141.
    2. Adams, Laurel & Régibeau, Pierre & Rockett, Katharine, 2014. "Incentives to create jobs: Regional subsidies, national trade policy and foreign direct investment," Journal of Public Economics, Elsevier, vol. 111(C), pages 102-119.
    3. 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.
    4. 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, August.

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    More about this item

    Keywords

    Foreign direct investment; location; regional policy; grants; and agglomeration;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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