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Agglomeration, regional grants and firm location

  • Michael Devereux

    ()

    (Institute for Fiscal Studies and University of Oxford)

  • Rachel Griffith

    ()

    (Institute for Fiscal Studies and University of Manchester)

  • Helen Simpson

    ()

    (Institute for Fiscal Studies and CMPO, Bristol)

We examine whether discretionary government grants influence the location of new plants, and how effective these incentives are in the presence of agglomeration and urbanisation externalities. We find evidence that regional industrial structure affects the location of new entrants. Firms in more agglomerated industries locate new plants near to others in the same industry. Firms are also attracted to industrially diversified locations. Foreign multinationals locate new plants near to other foreign-owned plants in the same industry. Fiscal incentives in the form of grants are found to have some effect in attracting plants to specific geographic areas eligible for such aid.

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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W04/06.

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Length: 28 pp
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:ifs:ifsewp:04/06
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  16. repec:eap:articl:v:33:y:2003:i:2:p:275-292 is not listed on IDEAS
  17. Thomas J. Holmes, 1998. "The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 667-705, August.
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