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Agglomeration, regional grants and firm location

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Author Info

  • Michael Devereux

    ()
    (Institute for Fiscal Studies and University of Oxford)

  • Rachel Griffith

    ()
    (Institute for Fiscal Studies and University of Manchester)

  • Helen Simpson

    ()
    (Institute for Fiscal Studies and CMPO, Bristol)

Abstract

We examine whether discretionary government grants influence the location of new plants, and how effective these incentives are in the presence of agglomeration and urbanisation externalities. We find evidence that regional industrial structure affects the location of new entrants. Firms in more agglomerated industries locate new plants near to others in the same industry. Firms are also attracted to industrially diversified locations. Foreign multinationals locate new plants near to other foreign-owned plants in the same industry. Fiscal incentives in the form of grants are found to have some effect in attracting plants to specific geographic areas eligible for such aid.

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Bibliographic Info

Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W04/06.

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Length: 28 pp
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:ifs:ifsewp:04/06

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Keywords: Corporation tax;

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References

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  1. Ellison, G. & Glaeser, E.L., 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Working papers 94-27, Massachusetts Institute of Technology (MIT), Department of Economics.
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Citations

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Cited by:
  1. Daniele, Vittorio, 2007. "Criminalità e investimenti esteri. Un’analisi per le province italiane
    [The effect of organized crime on Foreign Investments. An Empirical Analysis for the Italian Provinces]
    ," MPRA Paper 6417, University Library of Munich, Germany.
  2. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Direct Investments in Europe: Are Italian Regions Doomed?," Rivista di Politica Economica, SIPI Spa, vol. 95(1), pages 319-, January-F.
  3. Gilles Duranton, 2011. "California Dreamin': The Feeble Case for Cluster Policies," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 3(1), pages 3-45, July.
  4. Jonathan Jones & Colin Wren, 2008. "FDI Location Across British Regions and Inward Investment Policy," SERC Discussion Papers 0013, Spatial Economics Research Centre, LSE.
  5. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Investments in Europe - are Italian Regions Doomed?," ERSA conference papers ersa05p148, European Regional Science Association.
  6. Jordi Jofre Monseny, 2005. "On the scope of agglomeration economies: Evidence from Catalan zip codes," Working Papers 2005/4, Institut d'Economia de Barcelona (IEB).
  7. Vittorio Daniele & Ugo Marani, 2008. "Organized Crime and Foreign Direct Investment: The Italian Case," CESifo Working Paper Series 2416, CESifo Group Munich.
  8. 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.

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