02038cas a2200313 a 4500 AALejournalIMF003752 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451862126 1018-5941 BD-DhAAL BD-DhAAL Yehoue, Etienne. Clusters As a Driving Engine for FDI / Etienne Yehoue. Washington, D.C. : International Monetary Fund, 2005. 1 online resource (29 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students 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. Mode of access: Internet Expected Return imf Foreign Investor imf Investor Group imf Investors Decision imf WP imf Mauritius imf IMF Working Papers; Working Paper ; No. 2005/193 Full text available on IMF http://elibrary.imf.org/view/journals/001/2005/193/001.2005.issue-193-en.xml IMF e-Library