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The Attraction of Foreign Manufacturing Investments: Investment Promotion and Agglomeration Economies

Listed author(s):
  • Keith Head
  • John C. Ries
  • Deborah L. Swenson

We study Japanese investments between 1980 and 1992 to assess the effectiveness of state promotion efforts in light of strong agglomeration economies in Japanese investment. Two policy variables are consistently shown to influence the location of investment - foreign trade zones and labor subsidies. We use simulations to explore the impact these policies had on the geographic distribution of Japanese investment. The simulations reveal that in aggregate promotion programs largely offset each other; however, unilateral withdrawal of promotion causes individual states to lose substantial amounts of foreign investment.

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File URL: http://www.nber.org/papers/w4878.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4878.

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Date of creation: Oct 1994
Publication status: published as Head, Keith, John Ries and Deborah Swenson. "Agglomeration Benefits And Location Choice: Evidence From Japanese Manufacturing Investments In The United States," Journal of International Economics, 1995, v38(3/4,May), 223-247.
Handle: RePEc:nbr:nberwo:4878
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