Information Frictions, Investment Promotion, and Multinational Production: Firm-Level Evidence

Jeronimo Carballo, Ignacio Marra De Artinano and Christian Volpe Martincus

No 2023-02, Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: While countries make use of a wide range of policies to attract multinational firms, identifying the effect of such policies is difficult. Combining firm-level data on both the location of these firms’ foreign affiliates and detailed service-specific information from Costa Rica’s investment promotion agency (IPA) over time, we find that IPA support significantly increases the probability that a multinational firm establishes its first affiliate in the country. Using existing theory and data, we estimate that the associated welfare gains are between 0.2%-0.4%. We then show that the effect is primarily driven by the resolution of information asymmetries. It is stronger for IPA information services and on multinational firms from countries and in sectors facing more severe information frictions.

Keywords: Information Frictions; Investment Promotion; Multinational Production (search for similar items in EconPapers)
Pages: 67 p.
Date: 2023-01
New Economics Papers: this item is included in nep-fdg and nep-int
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Citations: View citations in EconPapers (1)

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Working Paper: Information Frictions, Investment Promotion, and Multinational Production: Firm-Level Evidence (2021)
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