Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235413 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9043
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
While countries make use of a wide range of policies to attract multinational firms, identifying the effect of such policies is difficult. Combining firm-level data on both the location of these firms’ foreign affiliates and detailed service-specific information from Costa Rica’s investment promotion agency (IPA) over time, we find that IPA support significantly increases the probability that a multinational firm establishes its first affiliate in the country, but has generally no impact on the expansion of its presence thereafter. We then show that this effect is primarily driven by the resolution of information asymmetries. It is stronger for IPA information services and on multinational firms from countries and in sectors facing more severe information frictions.
Subjects: 
information frictions
investment promotion
multinational production
JEL: 
F23
F13
F14
L23
L25
L52
O25
Document Type: 
Working Paper
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