can apply for state sales and use tax refunds (tied to the amount of capital investment and number of jobs created) of up to $1.25 million over five years for qualified spending on machinery and equipment, building materials, electricity and natural gas, and construction labor. Local communities must also offer incentives to designated projects, which can include tax abatements, utility rate reductions, public service expansion, tax increment financing, and expedited permitting, among others. Only census block groups that meet a minimum poverty criterion are eligible. The study finds that Empowerment Zone designation increases resident employment in block groups with poverty rates near 20 percent by 1–2 percent a year. The employment effects seem to be concentrated in jobs paying less than $40,000 a year and are largely in the construction, manufacturing, retail, and wholesale trade industries.

As evident, most of the literature only examines developed country contexts. In addition, the specificity of findings to distinct objectives, industries, income groups, and geographic areas adds to the complexity of impact evaluation and the replicability of findings. Behavioral incentives are likely to be the top priority for future research.

Finally, one of the earlier works by Blomström and Kokko (2003) suggests that the use of investment incentives focusing exclusively on foreign firms is generally not an efficient way to raise national welfare because the positive externalities from FDI are not automatic. If the subsidies are larger than positive externalities from FDI, the host country will not only lose public revenue, but the incentives will also discriminate against local firms that may lose jobs and market shares. Further, the benefits are realized only if local firms have the ability and motivation to invest in absorbing foreign technologies and skills. As a result, incentives should be provided at equal terms to both foreign and domestic investment. They should focus on activities with the strongest spillover potential. These include linkages, education and R&D.

The scope for future research regarding incentives is large including, notably, a deepening understanding about the effectiveness of locational incentives in specific sectors as well as behavioral incentives and their role in global value chain participation and upgrading. However, to date, few studies evaluate incentives aimed at fostering the various benefits of FDI. Future studies could, for example, examine incentives for foreign‐domestic partnerships — whether in the form of joint ventures or NEMs, or for linkages between FDI and suppliers.

- **_B. Moving beyond attraction: Entry reforms are essential, especially in services_**

Despite the pace of economic globalization, liberalization of entry regimes for FDI can face strong protectionist resistance. In many countries, arguments for “national interests” and “strategically sensitive industries” are often used to justify FDI entry barriers for fear of competition and other protectionist motivations (WEF 2013).

Between 2000 and 2013, the share of FDI restrictions and excessive regulation in policy measures introduced to govern FDI jumped from 6 to 27 percent. Though almost half of these measures applied across the board, most industry‐specific measures applied to services (UNCTAD 2014). In addition, 17