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FDI location across British regions and inward investment policy

  • Jonathan Jones
  • Colin Wren
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    The theory and empirical evidence on FDI location emphasise agglomeration economies over classical location factors, such as grants. This paper uses panel data to analyse the effect of the main instrument of inward investment policy, the UK regional policy grants, on the distribution of FDI projects across British regions over 1985-05. Using a GMM estimator the paper finds grants have a significant effect on FDI, even when agglomeration terms are included, but that its effect diminished over the 1990s. This is attributed to a redrawing of the eligible areas map. It concludes that in relation to foreign investment regional policy is no longer able to affect the regional distribution of FDI, so the grants are an instrument of national development policy.

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    File URL: http://eprints.lse.ac.uk/33204/
    File Function: Open access version.
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    Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 33204.

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    Length: 37 pages
    Date of creation: Dec 2008
    Date of revision:
    Handle: RePEc:ehl:lserod:33204
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    Web page: http://www.lse.ac.uk/

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