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Multinationals and Industrial Policy

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  • Giorgio Barba Navaretti

    (University of Milan and Centro Studi Luca d’Agliano)

  • Anthony J. Venables

    (University of Oxford and CEPR)

Abstract

Are there benefits to the host country from multinational investments? Does potential value from these investments make active industrial policy worthwhile? We answer the first question affirmatively, having reviewed economic principles and evidence concerning the effects of projects locating in (or not being off-shored from) a country. On the second, policy can have a limited effect in influencing location decisions, but it is doubtful that it is cost effective. Implementation faces lack of information, risk of capture and, in many cases, non-rigorous processes. Competition between jurisdictions means that much policy is investment diversion not investment creation. There is a case for supra-national controls (as with EU State Aid regulations), for policy to be used only for well-defined market failures, and for better implementation and more rigorous ex-ante appraisal and ex-post evaluation.

Suggested Citation

  • Giorgio Barba Navaretti & Anthony J. Venables, 2013. "Multinationals and Industrial Policy," Development Working Papers 352, Centro Studi Luca d'Agliano, University of Milano, revised 24 Apr 2013.
    • Handle: RePEc:csl:devewp:352
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    2. Xue, Jiashun & Poon, Jessie & Yang, Yu & Ji, Qiang, 2024. "Effect of green industrial policy on China's outward renewable energy investment," Energy Economics, Elsevier, vol. 138(C).
    3. Marta Anna GÖTZ, 2015. "Pursuing FDI policy in the EU – Member States and their policy space," Journal of Economics and Political Economy, KSP Journals, vol. 2(2), pages 290-308, June.

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    Keywords

    Multinational Corporations; Industrial Policy;

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