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One Size Does Not Fit All: Foreign Direct Investment Promotion Policies across US States

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  • Wu, Chen
  • Rogers, Cynthia L.

Abstract

US states employ a variety of policies to attract and enhance foreign direct investment (FDI). The uniqueness of state policy choices and economies suggest the effectiveness of given FDI policies is likely to be non-uniform across states. We address this issue by employing a simultaneous quantile regression (SQR) approach using state-level employment by foreign manufacturing firms for 50 states between 1997 and 2008. SQR methods are useful for identifying potential heterogeneous impacts when behavior is different in the tails of the distribution. The estimates provide evidence of heterogeneous responses to policies based on state-level characteristics: the estimated effects of the provision of foreign-trade zones, better infrastructure, and the number and location of promotion offices abroad vary significantly across the FDI-related employment distribution. Robustness tests are offered to address shortcomings of the SQR approach. The results provide nuanced guidance for state policy makers seeking to enhance FDI-related employment in manufacturing.

Suggested Citation

  • Wu, Chen & Rogers, Cynthia L., 2017. "One Size Does Not Fit All: Foreign Direct Investment Promotion Policies across US States," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 48(01), April.
    • Handle: RePEc:ags:jrapmc:339903
    DOI: 10.22004/ag.econ.339903
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