REGIONAL GRANTS AND FDI LOCATION: EVIDENCE FROM SWEDISH REGIONAL POLICY PROGRAMS 2002-2009

This study investigates factors determining the location of foreign direct investments (FDI) in Sweden. The main purpose is to examine the link between FDI and public incentives, in the form of regional grants, which make up a central part of the Swedish regional policy and state expenditures that explicitly addresses regional development. Our main finding is that there is no evidence of a robust relationship between grants and the location of FDI. However, a statistically significant effect is found for investment support and transport allowance, which are grants that aims at promoting development in designated areas. This by supporting investments in machines, buildings, and so on, and offset costs disadvantages in the northern parts of the country. We conclude that a better integration between the work on FDI and regional development may be a plausible route to promote economic development in Sweden, particularly in deprived regions.