Policy competition and foreign direct investment in Europe

Policy competition and foreign direct investment in Europe:

Based on a review of existing research literature and statistical sources, this report was produced for the OECD Development Centre by staff at the European Policies Research Centre (EPRC) based at the University of Strathclyde. The study addresses the issue of policy competition in Europe by considering three sets of questions. First, it gauges the level of policy competition in Europe, assessing the extent to which governments in both Western and CEE governments have positive attitudes towards encouraging foreign investment and detailing the main policy areas and approaches used by governments. Secondly, it looks at the question of whether policy competition is increasing by considering different factors influencing future changes in FDI trends and likely policy responses to these changes. Lastly, the study examines the effects of policy competition in Europe and whether inter-governmental rivalry has encouraged an overall rise in FDI, increased investment in human capital and infrastructure, more open national markets and a more secure legal environment, or, whether it has led to costly 'bidding wars' between countries, involving rising incentive budgets and diminishing labour and environmental standards.

The study is divided into two sections. The first sets the policy context for foreign investment competition in Europe. The second section examines policy competition in specific policy areas, principally in Western Europe.