The Economics of Foreign Direct Investment Incentives

Blomström, Magnus and Ari Kokko

No 3775, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper suggests that the use of investment incentives focusing exclusively on foreign firms - although motivated in some cases from a theoretical point of view - is generally not an efficient way to raise national welfare. The main reason is that the strongest theoretical motive for financial subsidies to inward FDI ? spillovers of foreign technology and skills to local industry ? is not an automatic consequence of foreign investment. The potential spillover benefits are realized only if local firms have the ability and motivation to invest in absorbing foreign technologies and skills. To motivate subsidization of foreign investment, it is therefore necessary, at the same time, to support learning and investment in local firms as well.

Keywords: Foreign direct investment; Investment incentives (search for similar items in EconPapers)
JEL-codes: J23 O12 (search for similar items in EconPapers)
Date: 2003-02
References: Add references at CitEc
Citations: View citations in EconPapers (256)

Downloads: (external link)
https://cepr.org/publications/DP3775 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: The Economics of Foreign Direct Investment Incentives (2003)
Working Paper: The Economics of Foreign Direct Investment Incentives (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:3775

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP3775

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().