Investment incentive is a government-implemented
incentive
In general, incentives are anything that persuade a person to alter their behaviour. It is emphasised that incentives matter by the basic law of economists and the laws of behaviour, which state that higher incentives amount to greater levels of ...
policy aimed to encourage
investor
An investor is a person who allocates financial capital with the expectation of a future return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Typ ...
s into its
domestic market
A domestic market, also referred to as an internal market or domestic trading, is the supply and demand of goods, services, and securities within a single country. In domestic trading, a firm faces only one set of competitive, economic, and market ...
or to promote expansion of existing businesses. Investment incentives encompass creating an environment that enables foreign businesses to operate profitably and decreases risks. They are widely used by
developing countries
A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agree ...
to attract investments. The incentives take form of "direct subsidies (investment grants) or corporate income tax credits (investment credit) that compensates the investors for their capital costs".
Scholars generally consider economic development incentives to be inefficient, economically costly, and distortionary.
See also
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Foreign direct investment
A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct c ...
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List of countries by FDI abroad
This is the list of countries by stock of Foreign direct investment (FDI) abroad, that is the cumulative US dollar value of all investments in foreign countries made directly by residents - primarily companies - of the home country, as of the end o ...
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List of countries by received FDI
This article includes a list of countries of the world sorted by received foreign direct investment (FDI) stock, the level of accumulated FDI in a country. The US dollar estimates presented here are calculated at market or government official exc ...
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Investment promotion agency An investment promotion agency (IPA) is most often a government agency (or occasionally a non-profit organization functioning similar to a chamber of commerce or business consulting corporation) whose mission is to attract investment to a country, s ...
Further reading
* Jensen, N., & Malesky, E. (2018). ''Incentives to Pander: How Politicians Use Corporate Welfare for Political Gain''. Cambridge: Cambridge University Press.
References
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Financial markets
Foreign direct investment
International macroeconomics