Attracting Foreign Direct Investments in Europe: Are Italian Regions Doomed?
Centro Studi Luca d'Agliano Development Studies Working Paper No. 200
36 Pages Posted: 26 Jul 2005
Date Written: March 2005
During the nineties, Europe became a major recipient of FDIs but Italian regions have been largely excluded from this process. Was it due to their characteristics, or were Italian regions 'doomed' by a negative country effect? In this paper we address this issue by estimating the determinants of multinational firms' location choices in 52 EU regions. We find that Italian regions indeed attracted significantly less than their observable potential, and that this could be explained by the inefficiency of the bureaucratic apparatus and of the legal system. The effect of taxes is instead strongly sensitive to the inclusion of agglomeration variables and is asymmetric across regions.
Keywords: Multinational firms, location choices, Italy, institutions and policies, negative binomial regression
JEL Classification: F23, C35, O52
Suggested Citation: Suggested Citation
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