Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/234692 
Year of Publication: 
2020
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-01106
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract: 
Multinational production has become increasingly important in recent decades. Countries resort to different industrial policies to influence the geography of this production. In this paper, we focus on a ubiquitous 'soft' industrial policy that aims at reducing information barriers - investment promotion. We present evidence on the impact of this policy on multinational firms location decisions using -for the first time to our knowledge- firm-level data. To do so, we carry out difference-in-differences and instrumental variables estimations on data on the establishment and location of affiliates of multinational firms and assistance by the investment promotion agency (IPA) in Costa Rica over the period 2000-2016. Estimates suggest that investment promotion has been effective: support from the IPA is associated with an increase of 11 percentage points in the probability that a multinational firm establishes its first affiliate in the country. This effect is stronger on firms from countries facing more severe information frictions.
Subjects: 
Multinational Production
Industrial Policy
Investment Promotion
JEL: 
F23
F13
F14
L23
L25
L52
O25
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper

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