The Role of Local Agglomeration Economies and Regional Characteristics in Attracting FDI: Italian Evidence

Rosa Bernardini Papalia and Silvia Bertarelli

International Journal of the Economics of Business, 2009, vol. 16, issue 2, pages 161-188

Abstract: The objective of this paper is to test for the importance of local agglomeration externalities in determining inward foreign direct investment (FDI) intensity, viewed as a measure of regional attractiveness to FDI. The links between the degree of FDI inflow penetration into Italy and its determinants at the regional level are examined using alternative fixed effects panel data model specifications, also extended to include spatial effects. It is found that sectoral and regional specificities are relevant in attracting inward FDI into Italy and the different effects of intra-sector and inter-sector spillovers can be distinguished. There is also evidence that the importance of agglomeration spillovers connected to the geographical distance varies across regions, indicating both substitution and complementarity effects from FDI inflows into neighboring regions.

Keywords: International Capital Mobility; Agglomeration Spillovers; Spatial Dependence; Censored Panel Data Models (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:taf:ijecbs:v:16:y:2009:i:2:p:161-188

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