This paper examines the role played by agglomeration economies as location determinants of regional foreign direct investment in manufacturing. The analysis reveals that foreign direct investment location is dependent on specific industry traits, and that agglomeration economies appear as the strongest pull factors. The model, estimated with panel data, finds evidence, first, that industries with a high level of linkages are attracted to regions with high manufacturing activity; and, second, that locations which accumulate R+D activities attract high-tech industries. Finally, one cost-oriented industry was found not to value agglomeration economies, being attracted instead to regions with low salary levels.

In this paper we test for the presence of localisation economies due to input- output linkages between vertically related firms located in the same region. To undertake this we estimate, by duality, a quadratic cost function using a sector by sector panel at the European regional level in the period 1985-1995. Vertical economies are derived from the concept of scope economies and associated to regional advantages of having in the proximity specialised providers of intermediate goods. Several specifications are tested and results indicate that the necessary conditions for the existence of economies of vertical disintegration are satisfied as well as the sufficient conditions for some sectors, showing that vertical diseconomies are stronger for the more geographically concentrated industries. These effects are not pervasive since there are also opportunities for efficiency gains from a more vertically integrated production for some sectors in several regions.

This paper quantifies the welfare effects of the Spanish public investment in infrastructures. For that purpose, we use data on Spanish economy to calibrate a dynamic general equilibrium model with a representative agent, where public investment is financed by means of distortionary taxes. As is usual, the stock of public infrastructures has a positive effect on the total factor productivity. However, as main contribution of the paper, we assume that this effect depends on the effective endowment of infrastructures. In particular, we assume that thereare diminishing returns to scale at the private level as a consequence of the existence of transport costs, which negatively depend on the stock of infrastructures per unit of output.

This paper examines the locational determinants of foreign direct investment (FDI) in manufacturing activities in the regions of Spain, with particular attention to agglomeration factors, and the effect of these determinants on three separate industries. The analysis reveals that agglomeration economies are significant determinants of the regional distribution of manufacturing FDI, and that the nature and importance of locational determinants vary according to the specific needs of each industry.