Multinationals' Location Choice, Agglomeration Economies, and Public Incentives

Abstract

We study the regional location decision of multinationals in Ireland since the 1970s by focusing on the role played by agglomeration economies and by a distinct change in regional policy intent on dispersing industrial activity to the more disadvantaged areas of Ireland. We find that regional policy has only been effective in attracting low-tech firms to the disadvantaged areas during the time when there was a more indirect approach to regional policy. Our results also show that hi-tech firms spread more evenly across the country and that urbanization economies were for these firms a more important locational determinant than public incentives.