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Agglomeration, regional grants and firm location

Author

Listed:
  • Michael Devereux

    (Institute for Fiscal Studies and University of Oxford)

  • Rachel Griffith

    (Institute for Fiscal Studies and University of Manchester)

  • Helen Simpson

    (Institute for Fiscal Studies and CMPO, Bristol)

Abstract

We examine whether discretionary government grants influence the location of new plants, and how effective these incentives are in the presence of agglomeration and urbanisation externalities. We find evidence that regional industrial structure affects the location of new entrants. Firms in more agglomerated industries locate new plants near to others in the same industry. Firms are also attracted to industrially diversified locations. Foreign multinationals locate new plants near to other foreign-owned plants in the same industry. Fiscal incentives in the form of grants are found to have some effect in attracting plants to specific geographic areas eligible for such aid.

Suggested Citation

  • Michael Devereux & Rachel Griffith & Helen Simpson, 2004. "Agglomeration, regional grants and firm location," IFS Working Papers W04/06, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:04/06
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    Cited by:

    1. Daniele, Vittorio, 2007. "Criminalità e investimenti esteri. Un’analisi per le province italiane [The effect of organized crime on Foreign Investments. An Empirical Analysis for the Italian Provinces]," MPRA Paper 6417, University Library of Munich, Germany.
    2. Jordi Jofre Monseny, 2005. "On the scope of agglomeration economies: Evidence from Catalan zip codes," Working Papers 2005/4, Institut d'Economia de Barcelona (IEB).
    3. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Investments in Europe - are Italian Regions Doomed?," ERSA conference papers ersa05p148, European Regional Science Association.
    4. Vittorio, Daniele & Ugo, Marani, 2008. "Organized Crime and Foreign Direct Investment: the Italian Case," MPRA Paper 7217, University Library of Munich, Germany.
    5. Jonathan Jones & Colin Wren, 2008. "FDI Location Across British Regions and Inward Investment Policy," SERC Discussion Papers 0013, Centre for Economic Performance, LSE.
    6. Roberto Basile & Luigi Benfratello & Davide Castellani, 2005. "Attracting Foreign Direct Investments in Europe: Are Italian Regions Doomed?," Rivista di Politica Economica, SIPI Spa, vol. 95(1), pages 319-319, January-F.
    7. Gilles Duranton, 2011. "California Dreamin': The Feeble Case for Cluster Policies," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 3(1), pages 3-45, July.
    8. Colin Wren & Jonathan Jones, 2011. "Assessing The Regional Impact Of Grants On Fdi Location: Evidence From U.K. Regional Policy, 1985–2005," Journal of Regional Science, Wiley Blackwell, vol. 51(3), pages 497-517, August.
    9. Jones, Jonathan & Wren, Colin, 2008. "FDI location across British regions and inward investment policy," LSE Research Online Documents on Economics 33204, London School of Economics and Political Science, LSE Library.
    10. Basile, Roberto & Castellani, Davide & Zanfei, Antonello, 2008. "Location choices of multinational firms in Europe: The role of EU cohesion policy," Journal of International Economics, Elsevier, vol. 74(2), pages 328-340, March.
    11. Emmanuel Cleeve, 2007. "Japanese Foreign Direct Investment in the UK Electronic Industry: The Eclectic Approach," Asia Pacific Business Review, Taylor & Francis Journals, vol. 13(2), pages 183-200, April.

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    More about this item

    Keywords

    Corporation tax;

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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