FDI Location across British Regions and Agglomerative Forces: A Markov Analysis

ABSTRACT This paper analyses the location of foreign direct investment across the regions of Great Britain over 1985–2005 using the framework of discretized Markov chains. FDI is measured according to the regional share of inward investment projects, where a distinction is made between manufacturing and services, and industries with different FDI growth profiles. The paper finds convergence in location, which is strong in manufacturing arising from a North-to-South shift in location. This seems to be related to a weakening of UK regional policy, and suggests that while policy can overcome agglomeration economies, it is not self-sustaining. In services, there is some spreading out of FDI location, but no evidence of a South-to-North shift, which has implications for regional development. RESUME La presente communication analyse l'emplacement d'investissements directe etrangers dans les differentes regions de Grande-Bretagne, au cours de la periode 1985–2005, en utilisant le cadre de chaines discretisees de...