Abstract:

Foreign direct investment (FDI) has emerged as a prominent topic in both public and private discourse, particularly due to its increasingly significant role in shaping economic development and its ability to integrate the host country into global value chains. Not all countries have equally benefited from it, however, with complex, developed, and competitive economies tending to draw more FDI. The unequal allocation of FDI can potentially exacerbate global inequality, as countries with higher FDI inflows are able to reap greater economic benefits. These disparities extend beyond differences between countries, as within-country disparities have also become a significant issue (Iammarino, 2018). With the reduction of global trade and investment barriers, regions have risen to the forefront of FDI competition, with subnational considerations playing an increasingly central role. A recent OECD (2022) report revealed that the top performing regions attracted, on average, 700 times more foreign investment than the lowest-performing ones. The report also highlighted that FDI per capita disparities remain substantially high and primarily driven by differences within countries, that is, at the subnational level.