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Fancy a Stay at the ‘Hotel California’? The Role of Easy Entry and Exit for FDI

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  • Holger Görg

Abstract

Investment incentives targeted at attracting multinational firms have been extensively researched, and empirical evidence has shown them to be influential. The same is not true of exit restrictions. Yet, as recent theory suggests, there may be a trade‐off between entry incentives and ease of exit. This paper focuses on that trade‐off in the case of US multinationals in 33 host countries. An indicator of labour market regulations is used as a measure of ease of exit. Results suggest that both entry incentives and labour market regulations are important and ignoring the latter neglects an important dimension in firms' location decision.

Suggested Citation

  • Holger Görg, 2005. "Fancy a Stay at the ‘Hotel California’? The Role of Easy Entry and Exit for FDI," Kyklos, Wiley Blackwell, vol. 58(4), pages 519-535, November.
    • Handle: RePEc:bla:kyklos:v:58:y:2005:i:4:p:519-535
    DOI: 10.1111/j.0023-5962.2005.00300.x
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    References listed on IDEAS

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    1. Jonathan E. Haskel & Sonia C. Pereira & Matthew J. Slaughter, 2007. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 482-496, August.
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    4. Dewit, G. & Holger, G. & Montagna, C., 2003. "Should I stay or should I go? A note on employment protection, domestic anchorage, and FDI," Economics Department Working Paper Series n1291003, Department of Economics, National University of Ireland - Maynooth.
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    Cited by:

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    6. Olney, William W., 2013. "A race to the bottom? Employment protection and foreign direct investment," Journal of International Economics, Elsevier, vol. 91(2), pages 191-203.

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