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ASSESSING THE REGIONAL IMPACT OF GRANTS ON FDI LOCATION: EVIDENCE FROM U.K. REGIONAL POLICY, 1985–2005

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Abstract:

ABSTRACT The paper implements a methodology for assessing the regional impact of investment grants on foreign direct investment (FDI) location, taking data for U.K. regional policy over the period 1985–2005. Using a Generalized Methods of Moments estimator it finds that each £25 million of grant changes the regional location of about six inward FDI projects. On average, projects have 150 jobs and each job diverted costs £27,500 (1995 prices). It also finds that the size of the area designated for grants has a positive location effect. The effect is small in relation to the overall scale of FDI, which may explain the weak grant effect found in recent plant‐based location studies.

Document Type: Research Article

DOI: http://dx.doi.org/10.1111/j.1467-9787.2010.00708.x

Affiliations: Department of Economics, Newcastle University Business School, Newcastle University, Newcastle upon Tyne, NE1 7RU, United Kingdom.

Publication date: August 1, 2011

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