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The impact of investment promotion on multinational production: Firm-level evidence

Author

Listed:
  • Carballo, Jerónimo
  • de Artiñano, Ignacio Marra
  • Volpe Martincus, Christian

Abstract

Countries make use of a wide range of policies to attract multinational firms, but identifying their effects is challenging. In this paper, we provide novel microeconometric evidence on the impacts of one of the most common of such policies: investment promotion. To do so, we combine firm-level data on both the location of multinational firms’ foreign affiliates and detailed service-specific information from Costa Rica’s investment promotion agency (IPA) over time. We find that IPA support significantly increases the probability that a multinational firm establishes its first affiliate in the country. We then show that this effect is particularly strong for information services and on multinational firms from home countries and in sectors potentially facing more severe information frictions.

Suggested Citation

  • Carballo, Jerónimo & de Artiñano, Ignacio Marra & Volpe Martincus, Christian, 2026. "The impact of investment promotion on multinational production: Firm-level evidence," Journal of Development Economics, Elsevier, vol. 180(C).
    • Handle: RePEc:eee:deveco:v:180:y:2026:i:c:s0304387825002172
    DOI: 10.1016/j.jdeveco.2025.103666
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    Keywords

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

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