The Role of Investment Incentives in Regional FDI Reallocation: A Regression-Discontinuity Approach
AbstractThis paper analyzes the causal effect of investment incentives on regional allocation of foreign direct investment (FDI) in the Czech Republic during 2001-2007. Investment incentives institutional setup provided foreign investors with financial incentives depending on the particular district unemployment rate. The identification strategy is based on a regression-discontinuity approach as the scheme design introduces three unemployment thresholds differentiating the amount of the subsidy. The results indicate a positive effect of the investment scheme, but this impact is concentrated only at the lowest available unemployment threshold, increasing annual FDI inflow per capita by 330 euros compared to districts ineligible for the subsidy. However, an impact at higher unemployment thresholds is not found. Attracting FDI into the most distressed regions needs to be complemented with other policy tools and remains to be an important challenge for policymakers. Among other FDI location factors, the share of tertiary educated labor force and wages have significant positive impact on FDI, albeit only during 2001-2004, increasing annual FDI inflow per capita by 25 and 12 euros, respectively.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp438.
Date of creation: Apr 2011
Date of revision:
Contact details of provider:
Postal: P.O. Box 882, Politickych veznu 7, 111 21 Praha 1
Phone: (+420) 224 005 123
Fax: (+420) 224 005 333
Web page: http://www.cerge-ei.cz
More information through EDIRC
foreign direct investment; government expenditures; public incentives; regional development;
Find related papers by JEL classification:
- H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
- J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stepan Jurajda & Katherine Terrell, 2007.
"Regional Unemployment and Human Capital in Transition Economies,"
CERGE-EI Working Papers
wp345, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
- Stepán Jurajda & Katherine Terrell, 2009. "Regional unemployment and human capital in transition economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(2), pages 241-274, 04.
- Jurajda, Štepán & Terrell, Katherine, 2007. "Regional Unemployment and Human Capital in Transition Economies," IZA Discussion Papers 3176, Institute for the Study of Labor (IZA).
- Jurajda, Stepan & Terrell, Katherine, 2007. "Regional Unemployment and Human Capital in Transition Economies," CEPR Discussion Papers 6569, C.E.P.R. Discussion Papers.
- Beata K. Smarzynska, 2003.
"Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers through Backward Linkages,"
William Davidson Institute Working Papers Series
548, William Davidson Institute at the University of Michigan.
- Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June.
- Smarzynska, Beata K., 2002. "Does foreign direct investment increase the productivity of domestic firms : in search of spillovers through backward linkages," Policy Research Working Paper Series 2923, The World Bank.
- Matthieu Crozet & Jean-Louis Mucchielli & Thierry Mayer, 2004.
"How do firms agglomerate? A study of FDI in france,"
Sciences Po publications
info:hdl:2441/c8dmi8nm4pd, Sciences Po.
- Crozet, Matthieu & Mayer, Thierry & Mucchielli, Jean-Louis, 2004. "How do firms agglomerate? A study of FDI in France," Regional Science and Urban Economics, Elsevier, vol. 34(1), pages 27-54, January.
- Crozet, Matthieu & Mayer, Thierry & Mucchielli, Jean-Louis, 2003. "How do Firms Agglomerate? A Study of FDI in France," CEPR Discussion Papers 3873, C.E.P.R. Discussion Papers.
- Crozet, M. & Mayer, T. & Micchielli, J.L., 2000. "How Do Firms Agglomerate? A Study of FDI in France?," Papiers d'Economie MathÃÂ©matique et Applications 2000.50, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1).
- Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 1-34.
- Smith Jr. , Donald F. & Florida Richard, 1994. "Agglomeration and Industrial Location: An Econometric Analysis of Japanese-Affiliated Manufacturing Establishments in Automotive-Related Industries," Journal of Urban Economics, Elsevier, vol. 36(1), pages 23-41, July.
- Melanie Lansbury & Nigel Pain & Katerina Smidkova, 1996.
"Foreign Direct Investment in Central Europe Since 1990: An Econometric Study,"
National Institute Economic Review,
National Institute of Economic and Social Research, vol. 156(1), pages 104-114, May.
- Melanie Lansbury & Nigel Pain & Katerina Smidkova, 2004. "Foreign Direct Investment in Central Europe Since 1990: An Econometric Study," Macroeconomics 0404002, EconWPA.
- Coughlin, Cletus C & Terza, Joseph V & Arromdee, Vachira, 1991. "State Characteristics and the Location of Foreign Direct Investment within the United States," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 675-83, November.
- Roberto Basile, 2002.
"Acquisition versus greenfield investment: the location of foreign manufacturers in Italy,"
ISAE Working Papers
27, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
- Roberto, Basile, 2004. "Acquisition versus greenfield investment: the location of foreign manufacturers in Italy," Regional Science and Urban Economics, Elsevier, vol. 34(1), pages 3-25, January.
- Guimaraes, Paulo & Figueiredo, Octavio & Woodward, Douglas, 2000. "Agglomeration and the Location of Foreign Direct Investment in Portugal," Journal of Urban Economics, Elsevier, vol. 47(1), pages 115-135, January.
- Austin Nichols, 2007. "Causal inference with observational data," Stata Journal, StataCorp LP, vol. 7(4), pages 507-541, December.
- Gerhard Untiedt & Hans Joachim Schalk, 2000. "Regional investment incentives in Germany: Impacts on factor demand and growth," The Annals of Regional Science, Springer, vol. 34(2), pages 173-195.
- Claudia Guagliano & Stefano Riela, 2005. "Do special economic areas matter in attracting FDI? Evidence from Poland, Hungary and Czech Republic," ISLA Working Papers 21, ISLA, Centre for research on Latin American Studies and Transition Economies, Universita' Bocconi, Milano, Italy, revised Nov 2005.
- Tondl, Gabriele & Vuksic, Goran, 2003. "What makes regions in Eastern Europe catching up? The role of foreign investment, human resources and geography," ZEI Working Papers B 12-2003, ZEI - Center for European Integration Studies, University of Bonn.
- Dinga, Marián & Münich, Daniel, 2010. "The impact of territorially concentrated FDI on local labor markets: Evidence from the Czech Republic," Labour Economics, Elsevier, vol. 17(2), pages 354-367, April.
- BARRIOS, Salvador & GORG, Holger & STROBL, Eric, 2003. "Multinationals' location choice, agglomeration economies and public incentives," CORE Discussion Papers 2003017, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jana Koudelkova).
If references are entirely missing, you can add them using this form.