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Attracting Foreign Direct Investments in Europe: are Italian Regions Doomed?

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Author Info

  • Roberto Basile

    (Isae (Rome) and University of Macerata)

  • Luigi Benfratello

    (University of Turin and Ceris-CNR(Turin))

  • Davide Castellani

    (University of Urbino and Centro Studi Luca d'Agliano)

Abstract

During the nineties, Europe became a major recipient of FDIs but Italian regions have been largely excluded from this process. Was it due to their characteristics, or were Italian regions ‘doomed’ by a negative country effect? In this paper we address this issue by estimating the determinants of multinational firms’ location choices in 52 EU regions. We find that Italian regions indeed attracted significantly less than their observable potential, and that this could be explained by the inefficiency of the bureaucratic apparatus and of the legal system. The effect of taxes is instead strongly sensitive to the inclusion of agglomeration variables and is asymmetric across regions.

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Bibliographic Info

Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 200.

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Date of creation: 15 Jun 2005
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Handle: RePEc:csl:devewp:200

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Keywords: multinational firms; location choices; Italy; institutions and policies; negative binomial regression;

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References

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  1. Beata Smarzynska Javorcik & Mariana Spatareanu, 2005. "Do Foreign Investors Care about Labor Market Regulations?," Working Papers Rutgers University, Newark 2005-005, Department of Economics, Rutgers University, Newark.
  2. Stephen S. Golub & Dana Hajkova & Daniel Mirza & Giuseppe Nicoletti & Kwang-Yeol Yoo, 2003. "The Influence of Policies on Trade and Foreign Direct Investment," OECD Economic Studies, OECD Publishing, vol. 2003(1), pages 7-83.
  3. 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.
  4. Marco Committeri, 2004. "Investire in Italia? Risultati di una recente indagine empirica," Temi di discussione (Economic working papers) 491, Bank of Italy, Economic Research and International Relations Area.
  5. 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.
  6. Stephen S. Golub, 2003. "Measures Of Restrictions on Inward Foreign Direct Investment for OECD Countries," OECD Economics Department Working Papers 357, OECD Publishing.
  7. Devereux, Michael P & Griffith, Rachel, 2003. "Evaluating Tax Policy for Location Decisions," International Tax and Public Finance, Springer, vol. 10(2), pages 107-26, March.
  8. Joshua Aizenman & Mark M. Spiegel, 2002. "Institutional Efficiency, Monitoring Costs, and the Investment Share of FDI," NBER Working Papers 9324, National Bureau of Economic Research, Inc.
  9. Raffaello Bronzini, 2004. "Foreign direct investment and agglomeration: evidence from Italy," Temi di discussione (Economic working papers) 526, Bank of Italy, Economic Research and International Relations Area.
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  11. Michael Devereux & Rachel Griffith, 1998. "The taxation of discrete investment choices," IFS Working Papers W98/16, Institute for Fiscal Studies.
  12. Roberto Basile & Davide Castellani & Antonello Zanfei, 2003. "Location choices of multinational firms in Europe: the role of national boundaries and EU policy," International Trade 0310001, EconWPA.
  13. Sergio Mariotti & Lucia Piscitello, 1995. "Information Costs and Location of FDIs within the Host Country: Empirical Evidence from Italy," Journal of International Business Studies, Palgrave Macmillan, vol. 26(4), pages 815-841, December.
  14. Jerry A. Hausman & Bronwyn H. Hall & Zvi Griliches, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," NBER Technical Working Papers 0017, National Bureau of Economic Research, Inc.
  15. Hines, James R, Jr, 1996. "Altered States: Taxes and the Location of Foreign Direct Investment in America," American Economic Review, American Economic Association, vol. 86(5), pages 1076-94, December.
  16. Agnès Bénassy-Quéré & Lionel Fontagné & Amina Lahrèche-Revil, 2000. "Foreign Direct Investment and the Prospects for Tax Co-Ordination in Europe," Working Papers 2000-06, CEPII research center.
  17. Dahlström, Tobias & Johnson, Andreas, 2007. "Bureaucratic Corruption, MNEs and FDI," Working Paper Series in Economics and Institutions of Innovation 82, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  18. Head, C. Keith & Ries, John C. & Swenson, Deborah L., 1999. "Attracting foreign manufacturing: Investment promotion and agglomeration," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 197-218, March.
  19. Devereux, Michael P. & Griffith, Rachel, 1998. "Taxes and the location of production: evidence from a panel of US multinationals," Journal of Public Economics, Elsevier, vol. 68(3), pages 335-367, June.
  20. Roberto Basile, 2002. "The Locational Determinants of Foreign-Owned Manufacturing Plants in Italy: Preliminary Results," Rivista di Politica Economica, SIPI Spa, vol. 92(4), pages 61-92, July-Augu.
  21. Smarzynska, Beata K., 2002. "The composition of foreign direct investment and protection of intellectual property rights : evidence from transition economies," Policy Research Working Paper Series 2786, The World Bank.
  22. 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.
  23. Stephen S. Golub, 2003. "Measures of Restrictions on Inward Foreign Direct Investment for OECD Countries," OECD Economic Studies, OECD Publishing, vol. 2003(1), pages 85-116.
  24. Gross, Dominique M. & Ryan, Michael, 2008. "FDI location and size: Does employment protection legislation matter?," Regional Science and Urban Economics, Elsevier, vol. 38(6), pages 590-605, November.
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Cited by:
  1. Anna Maria Ferragina & Fernanda Mazzotta & Erol Taymaz & Kamil Yilmalz, 2013. "The Impact Of Fdi On Firm Survival And Employment: A Comparative Analysis For Turkey And Italy," ERSA conference papers ersa13p1211, European Regional Science Association.
  2. Roberto Basile & Luigi Benfratello & Davide Castellani, 2010. "Location Determinants of Greenfield Foreign Investments in the Enlarged Europe: Evidence from a Spatial Autoregressive Negative Binomial Additive Model," Working papers 10, Former Department of Economics and Public Finance "G. Prato", University of Torino.
  3. Renato Redondi & Mariasole Bannò & Marco Mutinelli, 2011. "Air Connectivity and Foreign Direct Investments The economic effects of the introduction of new routes," ERSA conference papers ersa11p249, European Regional Science Association.
  4. Valentina Meliciani & davide castellani & loredana mirra, 2013. "The Determinants Of Inward Foreign Direct Investment In Business Services Across European Regions," ERSA conference papers ersa13p861, European Regional Science Association.

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