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FDI Location across British Regions and Agglomerative Forces: A Markov Analysis

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  • Colin Wren
  • Jonathan Jones

Abstract

This paper analyses the location of foreign direct investment across the regions of Great Britain over 1985--2005 using the framework of discretized Markov chains. FDI is measured according to the regional share of inward investment projects, where a distinction is made between manufacturing and services, and industries with different FDI growth profiles. The paper finds convergence in location, which is strong in manufacturing arising from a North-to-South shift in location. This seems to be related to a weakening of UK regional policy, and suggests that while policy can overcome agglomeration economies, it is not self-sustaining. In services, there is some spreading out of FDI location, but no evidence of a South-to-North shift, which has implications for regional development. RÉSUMÉ La présente communication analyse l'emplacement d'investissements directe étrangers dans les différentes régions de Grande-Bretagne, au cours de la période 1985--2005, en utilisant le cadre de chaînes discrétisées de Markov. On mesure les IDE en fonction de la répartition régionale de projets d'investissements étrangers, où l'on fait la distinction entre les secteurs secondaire et tertiaire, et des industries à profil d'expansion des IDE. La présente communication établit une convergence du lieu, forte dans l'activité manufacturière, découlant d'un déplacement nord--sud des lieux : ceci semble indiquer un affaiblissement de la politique régionale du Royaume-Uni, mais aussi le fait que, bien que la politique puisse surmonter des économies d'agglomération, cette politique n'est pas auto-portante. Dans le secteur tertiaire, on relève un certain étalement des lieux d'IDE, mais non pas un déplacement nord--sud, ce qui comporte des implications sur le plan du développement régional. EXTRACTO Este estudio analiza la colocación de inversión extranjera directa a lo largo de las regiones de Gran Bretaña entre 1985--2005 empleando el marco de cadenas discretizadas de Markov. La FDI se mide conforme a la cuota regional de proyectos de inversión interior donde se distingue entre fabricación y servicios, e industrias con diferentes perfiles de crecimiento de FDI. El estudio descubre convergencia en la colocación, que es fuerte en fabricación y surge de un giro en colocación de ‘norte a sur’. Esto parece estar relacionado con un debilitamiento de la política regional británica, y sugiere que aunque la política puede superar las economías de aglomeración, no es autosuficiente. En cuanto a servicios, existe un cierto despliegue en la colocación de FDI, pero no hay evidencia de un giro de ‘sur a norte’, lo que tiene implicaciones para el desarrollo regional.

Suggested Citation

  • Colin Wren & Jonathan Jones, 2012. "FDI Location across British Regions and Agglomerative Forces: A Markov Analysis," Spatial Economic Analysis, Taylor & Francis Journals, vol. 7(2), pages 265-286, June.
  • Handle: RePEc:taf:specan:v:7:y:2012:i:2:p:265-286
    DOI: 10.1080/17421772.2012.669492
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    References listed on IDEAS

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    1. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert-Nicoud, 2005. "Economic Geography and Public Policy," Economics Books, Princeton University Press, edition 1, number 7524.
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    1. repec:spr:lsprsc:v:10:y:2017:i:3:d:10.1007_s12076-017-0192-z is not listed on IDEAS
    2. Elif Bascavusoglu-Moreau & Qian Cher Li, 2013. "Knowledge Spillovers & Sources of Knowledge in the Manufacturing Sector: Literature Review & Empirical Evidence for the UK," Working Papers wp451, Centre for Business Research, University of Cambridge.
    3. Wren, Colin, 2011. "Geographic concentration and the temporal scope of agglomeration economics: an index decomposition," LSE Research Online Documents on Economics 58351, London School of Economics and Political Science, LSE Library.
    4. Villaverde, José & Maza, Adolfo, 2015. "The determinants of inward foreign direct investment: Evidence from the European regions," International Business Review, Elsevier, vol. 24(2), pages 209-223.
    5. Colin Wren & Jonathan Jones, 2012. "On the Relative Importance of Intermediate and Non-Intermediate Goods for FDI Location: A New Approach," ERSA conference papers ersa12p165, European Regional Science Association.

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