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Location choices of multinational firms in Europe: the role of EU cohesion policy

  • Roberto Basile
  • Davide Castellani
  • Antonello Zanfei

In this paper we examine the determinants of location choices of multinational firms in Europe. In particular, we focus on the role of EU Cohesion Policy in attracting foreign investors from both within and outside Europe. Using data on 5,509 foreign subsidiaries established in 50 regions in 8 EU countries over the period 1991-1999, we estimate a mixed logit model of the determinants of MNFs’ location choices. We find that, after controlling for the role of agglomeration economies as well as a number of other regional and country characteristics and allowing for a very flexible correlation pattern among choices, Structural and Cohesion funds allocated by the EU to laggard regions have indeed contributed to attracting multinationals. These policies as well as other determinants play a different role in the case of European investors as opposed to non European ones.

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Paper provided by Università di Perugia, Dipartimento Economia in its series Quaderni del Dipartimento di Economia, Finanza e Statistica with number 32/2007.

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Length: 27 pages
Date of creation: 31 Apr 2007
Date of revision:
Handle: RePEc:pia:wpaper:32/2007
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  16. Devereux, Michael P. & Griffith, Rachel & Simpson, Helen, 2007. "Firm location decisions, regional grants and agglomeration externalities," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 413-435, April.
  17. D. Garel Rhys, 2004. "The Motor Industry in an Enlarged EU," The World Economy, Wiley Blackwell, vol. 27(6), pages 877-900, 06.
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