How Effective is Investment Promotion?: Firm-Level Evidence

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Jan 2020
In this paper we present evidence on the impact of investment promotion activities on multinational firms location decisions using -for the first time to our knowledge- firmlevel data. In particular, we carry difference-in-differences estimations on data on the establishment and location of affiliates of multinational firms and assistance to these firms by the national investment promotion agency in Costa Rica and Uruguay over the period 2000-2016. Estimation results suggest that investment promotion has been effective in attracting affiliates of multinational firms. Further, this effect is stronger on
firms headquartered in developed home countries.