Firm location decisions, regional grants and agglomeration externalities

Devereux, Michael, Griffith, Rachel and Simpson, Helen (2007) Firm location decisions, regional grants and agglomeration externalities. Journal of Public Economics, 91 (3-4). pp. 413-435.


We examine whether discretionary government grants influence where domestic and multinational firms locate new plants, and how the presence of agglomeration externalities interacts with these policy instruments. We find that a region's existing industrial structure has an effect on the location of new entrants. Grants do have a small effect in attracting plants to specific geographic areas, but importantly, we find that firms are less responsive to government subsidies in areas where there are fewer existing plants in their industry. This suggests that these subsidies are less effective in influencing firms' location decisions in the face of countervailing co-location benefits.

Item Type: Article
Keywords: Firm location; Agglomeration; Selective assistance; Regional policy
Subject(s): Taxation
Centre: Oxford University Centre for Business Taxation
Date Deposited: 01 Dec 2011 11:27
Last Modified: 23 Oct 2015 14:06

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