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Roll Out the Red Carpet and They Will Come: Investment Promotion and FDI Inflows

32 Pages Posted: 3 Dec 2011  

Torfinn Harding

University of Oxford

Beata Smarzynska Javorcik

University of Oxford - Department of Economics; World Bank - Development Research Group (DECRG); Centre for Economic Policy Research (CEPR)

Date Written: December 2011

Abstract

This study uses newly collected data on 124 countries to examine the effects of investment promotion on inflows of US foreign direct investment (FDI). We test whether sectors explicitly targeted by investment promotion agencies in their efforts to attract FDI receive more investment in the post‐targeting period, relative to the pre‐targeting period and non‐targeted sectors. The results of our analysis are consistent with investment promotion leading to higher FDI flows to countries in which red tape and information asymmetries are likely to be severe. The data suggest that investment promotion works in developing countries but not in industrialised economies.

Suggested Citation

Harding, Torfinn and Javorcik, Beata Smarzynska, Roll Out the Red Carpet and They Will Come: Investment Promotion and FDI Inflows (December 2011). The Economic Journal, Vol. 121, Issue 557, pp. 1445-1476, 2011. Available at SSRN: https://ssrn.com/abstract=1967350 or http://dx.doi.org/10.1111/j.1468-0297.2011.02454.x

Torfinn Harding

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

HOME PAGE: http://www.economics.ox.ac.uk/index.php/staff/page/harding

Beata Javorcik

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford
United Kingdom

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-458-8485 (Phone)
202-522-1159 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/bjavorcik

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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