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Short-Run Strategies For Attracting Foreign Direct Investment

Rodolphe Desbordes and Céline Azémar ()
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Céline Azémar: Department of Economics, University of Glasgow

Authors registered in the RePEc Author Service: Celine Azemar ()

No 1005, Working Papers from University of Strathclyde Business School, Department of Economics

Abstract: This paper empirically investigates the effectiveness and feasibility of two FDI policies, fiscal incentives and deregulation, aimed at improving the attractiveness of a country in the short run. Using disaggregated data on sales by US MNEs’ foreign affiliates in 43 developed and developing countries over the 1982-1994 period, results show that the provision of fiscal incentives or the deregulation of the labour market would exert a positive impact on total FDI. Given the drawbacks frequently associated with the use of incentive packages, economy-wide policies which ease firing procedures and reduce severance payments would certainly be the best policy option. This paper also highlights the different aggregation and omitted variable biases that have affected results of previous studies and provides some support to recent theoretical models of FDI by showing that third country effects and spatial interdependence influence respectively the location of export-platform FDI and vertical FDI.

Keywords: Foreign direct investment; fiscal incentives; regulations, market potential; spatial (search for similar items in EconPapers)
JEL-codes: F23 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2010-02
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Journal Article: Short‐run Strategies for Attracting Foreign Direct Investment (2010) Downloads
Working Paper: Short-Run Strategies For Attracting Foreign Direct Investment (2010) Downloads
Working Paper: Short-Run Strategies For Attracting Foreign Direct Investment (2009) Downloads
Working Paper: Short-run strategies for attracting Foreign Direct Investment (2009) Downloads
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