Policies to attract Foreign Direct Investment: An industry-level analysis
AbstractThis paper analyzes policies to attract Foreign Direct Investment (FDI) based on a sample comprising the US plus six EU countries (US-plus-EU-6) and four Central and Eastern European Countries (CEEC-4). The analysis draws on industry-level data for 1995-2003. A Dynamic Panel Data approach is used to isolate important country- and industry-level determinants of FDI inward stock. The estimated baseline model derived is used to assess the scope for FDI attraction policies. The scope for FDI is defined as the difference between the FDI inward stock received by a country-industry-pair, as implied by the baseline model ("estimated FDI"), and the inward FDI stock which could be realized if a certain "best practice" policy were carried out ("potential" FDI). The results show how different policy variables contribute to closing the gap between estimated and potential FDI. The countries in our sample fall into two groups: In the CEEC-4 an increase of R&D expenditures in GDP would result in a substantial increase in FDI, while in the US-plus-EU-6 an improvement of their unit labor cost position, e.g. via increases in labor productivity, and improvements in their tax position would attract additional FDI.
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 FIW in its series FIW Research Reports series with number I-019.
Date of creation: Jun 2008
Date of revision:
Contact details of provider:
Postal: FIW Project Office Austrian Institute of Economic Research Arsenal Objekt 20 A-1030 Vienna
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
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.:
- Barry, Frank & Görg, Holger & Strobl, Eric, 2001.
"Foreign Direct Investment, Agglomerations and Demonstration Effects: An Empirical Investigation,"
CEPR Discussion Papers
2907, C.E.P.R. Discussion Papers.
- Frank Barry & Holger Görg & Eric Strobl, 2003. "Foreign direct investment, agglomerations, and demonstration effects: An empirical investigation," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 139(4), pages 583-600, December.
- Frank Barry & Holger Görg & Eric Strobl, 2004. "Foreign direct investment, agglomerations, and demonstration effects: An empirical investigation," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 140(3), pages 583-600, September.
- Frank Barry & Holger Görg & Eric Strobl, 2001. "Foreign Direct Investment, Agglomerations and Demonstration Effects - An Empirical Investigation," Working Papers 200104, School Of Economics, University College Dublin.
- Blundell, Richard & Bond, Stephen, 1998.
"Initial conditions and moment restrictions in dynamic panel data models,"
Journal of Econometrics,
Elsevier, vol. 87(1), pages 115-143, August.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- James R. Markusen & Keith E. Maskus, 1999.
"Discriminating Among Alternative Theories of the Multinational Enterprise,"
NBER Working Papers
7164, National Bureau of Economic Research, Inc.
- Markusen, James R & Maskus, Keith E, 2002. "Discriminating among Alternative Theories of the Multinational Enterprise," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 694-707, November.
- Michael Peneder, 2007. "A sectoral taxonomy of educational intensity," Empirica, Springer, vol. 34(3), pages 189-212, July.
- Kimberly A. Clausing & Cosmina L. Dorobantu, 2005. "Re-entering Europe: Does European Union candidacy boost foreign direct investment?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 77-103, 01.
- Pavitt, Keith, 1984. "Sectoral patterns of technical change: Towards a taxonomy and a theory," Research Policy, Elsevier, vol. 13(6), pages 343-373, December.
- 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.
- Michael Devereux & Rachel Griffith, 1996. "Taxes and the location of production: evidence from a panel of US multinationals," IFS Working Papers W96/14, Institute for Fiscal Studies.
- David L. Carr & James R. Markusen & Keith E. Maskus, 2003. "Estimating the Knowledge-Capital Model of the Multinational Enterprise: Reply," American Economic Review, American Economic Association, vol. 93(3), pages 995-1001, June.
- Agnès Bénassy-Quéré & Nicolas Gobalraja & Alain Trannoy, 2007. "Tax and public input competition," Economic Policy, CEPR & CES & MSH, vol. 22, pages 385-430, 04.
- Bruce Blonigen, 2005.
"A Review of the Empirical Literature on FDI Determinants,"
Atlantic Economic Journal,
International Atlantic Economic Society, vol. 33(4), pages 383-403, December.
- Bruce A. Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," NBER Working Papers 11299, National Bureau of Economic Research, Inc.
- Stephen Ross Yeaple, 2003. "The Role of Skill Endowments in the Structure of U.S. Outward Foreign Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 726-734, August.
- Mutti, John & Grubert, Harry, 2004. "Empirical asymmetries in foreign direct investment and taxation," Journal of International Economics, Elsevier, vol. 62(2), pages 337-358, March.
- Deborah L. Swenson, 2004. "Foreign Investment and the Mediation of Trade Flows," Review of International Economics, Wiley Blackwell, vol. 12(4), pages 609-629, 09.
- Demekas, Dimitri G. & Horvath, Balazs & Ribakova, Elina & Wu, Yi, 2007. "Foreign direct investment in European transition economies--The role of policies," Journal of Comparative Economics, Elsevier, vol. 35(2), pages 369-386, June.
- Peter Egger & Michael Pfaffermayr, 2004. "Foreign Direct Investment and European Integration in the 1990s," The World Economy, Wiley Blackwell, vol. 27(1), pages 99-110, 01.
- Peter Walkenhorst, 2004. "Economic Transition and the Sectoral Patterns of Foreign Direct Investment," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 40(2), pages 5-26, March.
- Faruk Aydin & Hulya Saygili & Mesut Saygili & Gokhan Yilmaz, 2010. "Dis Ticarette Kuresel Egilimler ve Turkiye Ekonomisi," Working Papers 1001, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.