ABSTRACT
This chapter reviews the fast-accumulating evidence on the benefits and the costs that Foreign Direct Investment (FDI) is believed to provide to the host economy and specifically for regional development. It also reviews and critically appraises the voluminous evidence on the benefits and costs of FDI, focusing on the regional economy. The interest in FDI has not just been an academic matter, but policymakers at national, regional and sub-regional levels have actively sought to attract FDI. The chapter examines theoretical and empirical research, spanning work in the area of industrial organisation through to economic geography and related literatures. In terms of the benefits of FDI, the economic literature focuses on the efficiency gains that potentially spillover to the regional economy in the form of increased productivity. However, the chapter also spans to consider various costs of FDI to the regions, including potentially low-quality jobs in plants with high closure rates, and with few regional ties.
