Spatial Bias and the Location of Footloose Industry: A Simple Regional Model
In: The Canadian Journal of Economics, Band 20, Heft 3, S. 506
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In: The Canadian Journal of Economics, Band 20, Heft 3, S. 506
This paper suggests that the process of economic integration can generate positive effects for peripheral economies by increasing their attractiveness as a production base for multinational companies. Such investment is likely in the case of goods for which transportation costs are relatively low. Our analysis shows that US investment in Ireland illustrates this process, having increased considerably after 1992, in particular in the "weightless" electronics sector. It shows, however, that other peripheral countries in the EU, namely Greece, Portugal and Spain, have not been successful in attracting a proportionate share of the increased US investment following the process of integration. This suggests that economic integration may be a necessary, but not a sufficient condition for a peripheral country to attract MNCs; other variables such as language and culture, industrial policy and developing agglomerations also count.
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Irish policy towards foreign direct investment has evolved since the 1950s as a strategy driven primarily by the use of fiscal incentives to enhance the profitability of locating in Ireland, with grants as required to achieve a particular bargaining advantage in competing against alternative international locations. Our empirical analysis of European firms in Ireland suggests that the investment incentives offered appear to have led to significant gross job gains in the targeted high-tech sectors, as proxied here by the Metals & Engineering and Chemicals sectors. However, these gross gains have not translated into net gains of a similar magnitude.
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This paper derives some general expressions for the debt cost of capital to the Irish manufacturing sector, incorporating the interaction between fiscal and financial policies. A range of estimates of the actual cost (per cent per annum) of fixed assets in manufacturing is presented for the period 1958-1982. The estimates reinforce the findings of earlier studies that government intervention designed to encourage industrial employment has dramatically reduced the relative cost of capital to labour over the past twenty-five years.
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In: Journal of international economics, Band 14, Heft 3-4, S. 357-366
ISSN: 0022-1996