The Regional Impact of Foreign Direct Investment: Structure and Behavior in an Ownership-Disaggregated Computable General Equilibrium Model

Gary Gillespie (), Peter McGregor, J. Kim Swales () and Ya Ping Yin ()
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Gary Gillespie: University of Strathclyde
J. Kim Swales: University of Strathclyde
Ya Ping Yin: University of Hertfordshire

Chapter 5 in Trade, Networks and Hierarchies, 2002, pp 65-98 from Springer

Abstract: Abstract Despite government rhetoric in support of indigenous regional development, in practice the attraction of foreign-owned inward investment remains a key plank of regional policy. Just under half of all expenditure on UK Regional Selective Assistance (RSA) is awarded to foreign-owned firms (PA Cambridge Economic Consultants, 1993) and individual regional development agencies vie for the attraction of incoming plants, often offering an extensive package of incentives.2 In Gillespie et al (2001a) we assess the impact of RSA-assisted investment on the Scottish economy using a computable general equilibrium (CGE) approach. Our earlier analysis makes no distinction between the foreign- and UK-owned manufacturing sectors, yet the former accounted for 39% and 23% of Scottish Manufacturing gross output and employment, respectively, during 1996 (Scottish Office, 1999). There is, therefore, a substantial foreign-owned component of Scottish manufacturing, and this may have a significant impact on the behavior of the regional economy of Scotland. Accordingly, in this chapter we refine our earlier approach to focus directly on the employment effects of export-oriented Foreign Direct Investment (FDI).

Keywords: Foreign Direct Investment; Capital Stock; Real Wage; Regional Impact; Employment Effect (search for similar items in EconPapers)
Date: 2002
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DOI: 10.1007/978-3-662-04786-6_5

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