Using public policy instruments to attract Foreign Direct Investment (FDI) has become standard in most countries, irrespective of their level of development, geographical location or industrial structure. Against this background the paper analyses the suitability of various public policies to attract inward FDI stock based on a sample of 11 countries and 10 industries from the manufacturing sector over 10 years. For this aim we derive an empirical baseline model of the determinants of inward FDI stock. From this baseline model, FDI gaps - measured as the difference between the 'estimated actual' inward FDI stock and the 'potential' FDI stock which could be realized if a certain 'best practice policy' were carried out - are derived. The analysis focuses on business taxation, public research and development expenditures, the information and communication infrastructure endowment, labour costs as well as institutional and skill-related policies. The analysis inter alia reveals the share of each of these location factors in the total industry- and country-level FDI gap.
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Paper provided by The Vienna Institute for International Economic Studies, wiiw in its series Working Papers with number
48.
Length: 23 pages including 8 Tables Date of creation: Oct 2008 Date of revision: Publication status: Published as wiiw Working Paper, October 2008 Handle: RePEc:wii:wpaper:48
Find related papers by JEL classification: F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
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