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Multinational Production and "Soft" Industrial Policies

Author

Listed:
  • Carballo, Jerónimo
  • Marra de Artiñano, Ignacio
  • Volpe Martincus, Christian

Abstract

Multinational production has become increasingly important in recent decades. Countries resort to different industrial policies to influence the geography of this production. In this paper, we focus on a ubiquitous “soft” industrial policy that aims at reducing information barriers - investment promotion. We present evidence on the impact of this policy on multinational firms location decisions using -for the first time to our knowledge- firm-level data. To do so, we carry out difference-in-differences and instrumental variables estimations on data on the establishment and location of affiliates of multinational firms and assistance by the investment promotion agency (IPA) in Costa Rica over the period 2000-2016. Estimates suggest that investment promotion has been effective: support from the IPA is associated with an increase of 11 percentage points in the probability that a multinational firm establishes its first affiliate in the country. This effect is stronger on firms from countries facing more severe information frictions.

Suggested Citation

  • Carballo, Jerónimo & Marra de Artiñano, Ignacio & Volpe Martincus, Christian, 2020. "Multinational Production and "Soft" Industrial Policies," IDB Publications (Working Papers) 10118, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:10118
    DOI: http://dx.doi.org/10.18235/0002170
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    Citations

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    Cited by:

    1. Jerónimo Carballo & Ignacio Marra de Artiñano & Christian Volpe Martincus, 2021. "Information Frictions, Investment Promotion, and Multinational Production: Firm-Level Evidence," CESifo Working Paper Series 9043, CESifo.
    2. Gómez-Lobo, Andrés & Price, Juan José, 2020. "La enfermedad de costos de Baumol y el transporte público," IDB Publications (Working Papers) 10218, Inter-American Development Bank.
    3. Mejía-Guerra, José Antonio & Vos, Rob, 1997. "Poverty in Latin America and the Caribbean: An Inventory: 1980-95," IDB Publications (Working Papers) 6197, Inter-American Development Bank.
    4. María Ester Mancebo & Mariella Torello, 2000. "El sistema educativo uruguayo: Estudio de diagnóstico y propuesta de políticas públicas para el sector," IDB Publications (Working Papers) 8989, Inter-American Development Bank.
    5. José Antonio Mejía-Guerra & Rob Vos, 1997. "Poverty in Latin America and the Caribbean: An Inventory: 1980-95," IDB Publications (Working Papers) 10878, Inter-American Development Bank.

    More about this item

    Keywords

    Multinational Production; Industrial Policy; Investment Promotion;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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