An increasingly globalized marketplace has intensified competition among all levels of government to attract investment. Investment incentives—subsidies used to induce investors to choose one location over another—are one set of policy tools at governments' disposal to influence the flow of investment capital in their own favour.

A new report by the International Institute for Sustainable Development's Global Subsidies Initiative (GSI), Investment incentives: Growing use, uncertain benefits, uneven controls, provides an up-to-date, comprehensive and accessible account of how investment incentives are utilized by governments around the world, the debate over their effectiveness in attracting investment, and their potentially negative impact on sustainable development.

While investment incentives may promote economic growth in certain circumstances, the report demonstrates that they can also exacerbate income inequality, reduce economic efficiency and induce environmentally harmful economic activities.

"There is a potential for a 'race to the bottom' in investment incentives, whereby globalization and government decentralization are pushing many governments into offering incentives they may not be able to afford, and the money could be put to better uses," says the report's author, Dr. Kenneth P. Thomas.

Investment Incentives Seminar

On November 26, 2007, the GSI is hosting a seminar with author and leading expert on investment incentives, Dr. Kenneth P. Thomas, at the World Meteorological Organization, Geneva, Switzerland. The presentation will provide an overview of investment incentives globally, before focusing on specific industry case studies, including the call-center industry, biofuels manufacturing, and microchip fabrication. It concludes with an analysis of national, regional and global rules to control incentives.

About the Author

Kenneth P. Thomas is Associate Professor of Political Science and Fellow in the Center for International Studies, University of Missouri - St. Louis (1991-present).

His major publications are Competing for Capital: Europe and North America in a Global Era (Georgetown University Press, 2000); Capital Beyond Borders: States and Firm in the Auto Industry, 1960-1994 (Macmillan, 1997); and most recently, "The Sources and Processes of Tax and Subsidy Competition," in Ann Markusen, ed. Reining in the Competition for Capital (W.E. Upjohn Institute for Employment Research, 2007).

For more information about the seminar, please visit http://www.globalsubsidies.org, or contact us at [email protected].