Rethinking Investment Incentives: Trends and Policy Options

Edited by Ana Teresa Tavares-Lehmann, Perrine Toledano, Lise Johnson, and Lisa Sachs (Columbia University Press, July 2016).

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The use of incentives to attract investment is connected to and impacts the most pressing challenges facing us today, including climate change, corruption, employment, development, harmful competition, and public spending efficiency. How, when, where, and why governments use incentives to attract investment is therefore critically important to whether and how society benefits from investments and to other public policy decisions and trade-offs. It is increasingly apparent, however, that the use of incentives is not well understood—including by the policy makers who use them—which necessitates a closer look and, in many cases, a policy response.

In that context, this book explores the use of incentives by governments worldwide, illustrating current trends relating to a diverse range of incentives. It also discusses current and possible future efforts at the sub-national, national, and international level to address the policy and governance challenges that are both driving, and driven by, the use of incentives. By linking economic analysis, development impacts, regulatory issues and policy options, this book is a key resource for understanding what the increasing mobility of capital means for the cities, states, nations and regions that seek to attract, direct, and retain investments.

As an overall conclusion, this volume suggests that careful investment policies are particularly crucial to guide the strategic and efficient mobilization of public and private resources for improved economic, social and environmental outcomes. Investment incentives may play a useful role, if they are strategically and thoughtfully designed and are based on a robust cost-benefit analysis.

This volume arose from the discussions at the Columbia Center on Sustainable Investment’s Eighth Annual Columbia International Investment Conference on “Investment Incentives – The Good, The Bad, and the Ugly: Assessing the Costs, Benefits, and Options for Policy Reform,” held at Columbia University in New York in November 2013.

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CCSI has launched a series of short videos from the book’s authors, summarizing the important messages from each chapter:

Ana Teresa Tavares-Lehmann: Investment Incentives: An Introduction

Sarianna Lundan: Definitions, Motivations and Locational Determinants of Foreign Direct Investment

Christian Bellak: The Use of Investment Incentives

Philippe Gugler: Investment Incentives in the European Union

Chris Steele: Investment Incentives in the US –  Part 1

Charles Krakoff: Investment Incentives in the US – Part 2

Sebastian James: Tax Incentives Around the World 

Frances Ruane: A Holistic Approach to Investment Incentives – Part 1

Louis Brennan: A Holistic Approach to Investment Incentives – Part 2

Joachim Karl: Investment Incentives for Sustainable Development

Ellen Harpel: Cost-Benefit Analysis of Investment Incentives

Kenneth P. Thomas: Regulation of Investment Incentives – Subnational Efforts to Regulate Investment Incentives

Lise Johnson: Regulation of Investment Incentives – Supranational Efforts to Regulate Investment Incentives

Perrine Toledano: Concluding Remarks