Multinationals' Location Choice, Agglomeration Economies and Public Incentives

Abstract

We study the regional location of multinationals in Ireland since the 1970s by focusing on the role played by agglomeration economies and public incentives intent on dispersing industrial activity to the more disadvantaged areas of Ireland. We find that regional policy has only been effective in attracting low-tech firms to the disadvantaged areas during the time when there was a much more laissez-faire approach to regional policy and when the primary industrial policy emphasis was on attracting high-tech firms into Ireland in general. Our results also show that hi-tech firms spread more evenly across the country and that urbanization economies were for these firms a more important locational determinant than public incentives.

Keywords: multinational location, agglomeration economies, public incentives, regional policy, nested logit

JEL Classification: F23, R38