Firm Location Decisions, Regional Grants and Agglomeration Externalities

Advanced Institute of Management Research Paper No. 038

42 Pages Posted: 29 Nov 2008

See all articles by Rachel Griffith

Rachel Griffith

Institute for Fiscal Studies (IFS); University of Manchester; Centre for Economic Policy Research (CEPR)

Michael P. Devereux

Centre for Business Taxation, Oxford University; CESifo (Center for Economic Studies and Ifo Institute); Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR); University of Oxford - Said Business School; University of Oxford - Said Business School

Helen Simpson

CMPO; Institute for Fiscal Studies (IFS)

Date Written: May 28, 2006

Abstract

We examine whether discretionary government grants influence the location of new plants. Grants have a small effect in attracting plants to specific geographic areas, but their effectiveness increases with agglomeration externalities, measured by the number of other plants in that location in the same industry. We also 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, and firms are also attracted to industrially diversified locations. Foreign multinationals locate new plants near to other foreign-owned plants in the same industry.

Suggested Citation

Griffith, Rachel and Devereux, Michael P. and Simpson, Helen, Firm Location Decisions, Regional Grants and Agglomeration Externalities (May 28, 2006). Advanced Institute of Management Research Paper No. 038. Available at SSRN: https://ssrn.com/abstract=1308573 or http://dx.doi.org/10.2139/ssrn.1308573

Rachel Griffith (Contact Author)

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London WC1E 7AE
United Kingdom
+44 20 7291 4800 (Phone)
+44 20 7323 4780 (Fax)

University of Manchester ( email )

Arthur Lewis Building
Oxford Road
Manchester, M13 9PL
United Kingdom

HOME PAGE: http://www.ifs.org.uk/people/profile?id=37

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Michael P. Devereux

Centre for Business Taxation, Oxford University ( email )

Said Business School
Park End Street
Oxford, OX1 1HP
United Kingdom
+44 1865 288507 (Phone)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Helen Simpson

CMPO ( email )

University of Bristol
2 Priory Road
Bristol, BS8 ITX
United Kingdom

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom
+44 20 7291 4800 (Phone)
+44 20 7323 4780 (Fax)

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