Roll Out the Red Carpet and They Will Come: Investment Promotion and FDI Inflows

This study uses newly collected data on 124 countries to examine the effects of investment promotion on inflows of US foreign direct investment (FDI). We test whether sectors explicitly targeted by investment promotion agencies in their efforts to attract FDI receive more investment in the posttarge...

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Bibliographic Details
Published in:The Economic journal (London) 2011-12, Vol.121 (557), p.1445-1476
Main Authors: Harding, Torfinn, Javorcik, Beata S.
Format: Article
Language:English
Subjects:
Agency
Asymmetric information
Bureaucracy
Censuses
Developing countries
Economic models
Financial investments
Foreign direct investment
Foreign direct investments
Foreign investment
Foreign investments
Host country
Industrial economics
Information asymmetry
Investment policy
Investment promotion
Investors
NGOs
Nongovernmental organizations
Statistical significance
Studies
Trade promotion
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Summary:This study uses newly collected data on 124 countries to examine the effects of investment promotion on inflows of US foreign direct investment (FDI). We test whether sectors explicitly targeted by investment promotion agencies in their efforts to attract FDI receive more investment in the posttargeting period, relative to the pre-targeting period and non-targeted sectors. The results of our analysis are consistent with investment promotion leading to higher FDI flows to countries in which red tape and information asymmetries are likely to be severe. The data suggest that investment promotion works in developing countries but not in industrialised economies.
ISSN:0013-0133
1468-0297
DOI:10.1111/j.1468-0297.2011.02454.x