Multinationals and Industrial Policy

Posted: 29 May 2013

See all articles by Giorgio Barba Navaretti

Giorgio Barba Navaretti

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM); University of Milan - Centro Studi Luca d'Agliano (LdA)

Anthony J. Venables

University of Oxford; Centre for Economic Policy Research (CEPR)

Date Written: April 1, 2013

Abstract

Are there benefits to the host country from multinational investments? Does potential value from these investments make active industrial policy worthwhile? We answer the first question affirmatively, having reviewed economic principles and evidence concerning the effects of projects locating in (or not being off-shored from) a country. On the second, policy can have a limited effect in influencing location decisions, but it is doubtful that it is cost effective. Implementation faces lack of information, risk of capture and, in many cases, non-rigorous processes. Competition between jurisdictions means that much policy is investment diversion not investment creation. There is a case for supra-national controls (as with EU State Aid regulations), for policy to be used only for well-defined market failures, and for better implementation and more rigorous ex-ante appraisal and ex-post evaluation.

Keywords: Multinational Corporations, Industrial Policy

JEL Classification: L0

Suggested Citation

Barba Navaretti, Giorgio and Venables, Anthony J., Multinationals and Industrial Policy (April 1, 2013). Centro Studi Luca d'Agliano Development Studies Working Paper No. 352. Available at SSRN: https://ssrn.com/abstract=2271184 or http://dx.doi.org/10.2139/ssrn.2271184

Giorgio Barba Navaretti (Contact Author)

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

Via Conservatorio, 7
Milan, 20122
Italy
+390250321521 (Phone)

University of Milan - Centro Studi Luca d'Agliano (LdA) ( email )

Via Donizzatti 38
Milano, Mi 20122
Italy
+39 02 36683850 (Phone)

Anthony J. Venables

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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