TY - BOOK ID - 84539304 TI - Clusters As a Driving Engine for FDI PY - 2005 SN - 1462354874 1452753180 1283518236 1451907486 9786613830685 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Electronic books. -- local. KW - Investments, Foreign. KW - Exports and Imports KW - Taxation KW - Fiscal Policies and Behavior of Economic Agents: General KW - International Factor Movements and International Business: General KW - International Investment KW - Long-term Capital Movements KW - Market Structure, Firm Strategy, and Market Performance: General KW - Taxation, Subsidies, and Revenue: General KW - Finance KW - Public finance & taxation KW - Foreign direct investment KW - Tax incentives KW - Balance of payments KW - Investments, Foreign KW - Mauritius UR - https://www.unicat.be/uniCat?func=search&query=sysid:84539304 AB - This paper develops a model that highlights the importance of clusters for attracting foreign direct investment. It shows from a game theoretical perspective how the combination of setting up a cluster and implementing policy reforms will be a key engine for attracting FDI. Based on agglomeration externalities, the paper shows that the very emergence of clusters can make investment so profitable that investors can even afford to tolerate more policyinduced distortions than otherwise. With perfect information, it shows the existence of multiple equilibria, in which some countries attract FDI while other do not. An extension to the context of imperfect information refines the analysis to a unique equilibrium, in which some investors respond to reforms. The paper presents case studies to support the findings. ER -