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Multinationals and Industrial Policy

Author

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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. Nicolai J Foss & Ram Mudambi & Samuele Murtinu, 2019. "Taxing the multinational enterprise: On the forced redesign of global value chains and other inefficiencies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(9), pages 1644-1655, December.

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    Multinational Corporations; Industrial Policy;

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