Fiscal Incentives and Technological FDI in Morocco: Short-run dynamics and territorial competitiveness in the Age of AI
DOI:
https://doi.org/10.64612/ijiv.v2i1.59Keywords:
FDI, AI, Fiscal incentives, Territorial competitiveness, Digital transformationAbstract
Foreign direct investment (FDI) in technology is a key way for emerging countries to improve their production systems, spread new ideas, and accelerate their digital transformation. Morocco uses tax breaks and exemptions to draw investments in high-tech and AI-driven industries. This is because global competition in the digital world is getting tougher. Still, there isn't much real-world evidence on how well these rewards work. This research examines how tax breaks affect the amount and location of technology-related foreign direct investment, accounting for factors such as digital growth, AI readiness, and competitive advantages. An autoregressive distributed lag (ARDL) model is used to distinguish between short- and long-run effects, using annual time-series data from 2005 to 2023. The results show that fiscal benefits lead to only small, short-term increases in technological FDI, with almost no long-term effect. Short-term changes are mainly driven by trade openness and the overall state of the economy. Long-term investment choices are based on the quality of digital infrastructure, the readiness of AI, and the capacity of transportation. These results show that competition based on incentives alone is not sufficient. They show how important it is to have stable fiscal frameworks supported by strong digital ecosystems and effective local government.
References
Alfaro, L., & Chen, M. X. (2018). The digital divide, ICT diffusion, and inclusive growth. Journal of Monetary Economics, 97, 139–155. https://doi.org/10.1016/j.jmoneco.2018.03.001
Baldwin, R. (2016). The Great Convergence: Information Technology and the New Globalization. Harvard University Press.
Barrell, R., & Pain, N. (1996). An econometric analysis of U.S. foreign direct investment. The Review of Economics and Statistics, 78(2), 200–207. https://doi.org/10.2307/2109921
Blomström, M., Kokko, A., & Mucchielli, J. L. (2003). The economics of foreign direct investment incentives. In Foreign direct investment in the real and financial sector of industrial countries (pp. 37–60). Springer.
Branstetter, L. (2001). Are knowledge spillovers international or intranational in scope? Microeconometric evidence from the U.S. and Japan. Journal of International Economics, 53(1), 53–79.
Chenery, H. B., & Strout, A. M. (1966). Foreign assistance and economic development. The American Economic Review, 56(4), 679–733. http://www.jstor.org/stable/1813524
Deng, S., Li, B., & Wu, K. (2023). Analysing the impact of high-tech industry on regional competitiveness… Kybernetes, 52(9), 3647–3666.
Du, Z.-Y., & Wang, Q. (2024). Digital infrastructure and innovation: Digital divide or digital dividend? Journal of Innovation & Knowledge, 9(3), 100542.
Eaton, J., & Kortum, S. (2002). Technology, geography, and trade. Econometrica, 70(5), 1741–1779.
Gong, G., & Keller, W. (2003). Convergence and polarization in global productivity. Review of Economics and Statistics, 85(4), 988–995.
Görg, H., & Strobl, E. (2007). The effect of R&D subsidies on private R&D. Economica, 74(294), 215–234.
Guo, D., Guo, Y., & Jiang, K. (2016). Government decentralization and innovation: Evidence from China. China Economic Review, 41, 43–54.
Harding, T., & Javorcik, B. S. (2011). Roll out the red carpet and they will come: Investment promotion and FDI inflows. Economic Journal, 121(557), 1445–1476.
James, S. (2013). The effectiveness of tax incentives in attracting investment: Evidence from developing countries. World Bank.
Klemm, A., & Van Parys, S. (2012). Empirical evidence on the effects of tax incentives. International Tax and Public Finance, 19(3), 393–423.
Kose, M. A., Prasad, E. S., Rogoff, K., & Wei, S.-J. (2009). Financial globalization: A reappraisal. IMF Staff Papers, 56(1), 8–62.
Liu, Z., & Seric, A. (2023). Digital FDI and development: A framework for analysis. Journal of International Business Policy, 6(2), 150–170.
Montmartin, B., & Herrera, M. (2015). Internal and external effects of R&D subsidies and fiscal incentives. Research Policy, 44(5), 1065–1079.
OECD. (2007). Tax incentives for research and development: Trends and issues. OECD Publishing.
OECD. (2020). Digital Economy Outlook 2020. OECD Publishing.https://doi.org/10.1787/bb167041-en
OECD. (2020). Tax Policy Reforms 2020: OECD and Selected Partner Economies. OECD Publishing. https://doi.org/10.1787/da56c295-en
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326.
Shiller, R. J., & Perron, P. (1985). Testing the random walk hypothesis: Power versus frequency of observation. Economics Letters, 18(4), 381–386.
Solow, R. M. (1956). A contribution to the theory of economic growth. The Quarterly Journal of Economics, 70(1), 65–94.
UNCTAD. (2004). World Investment Report 2004: The shift towards services. United Nations.
UNCTAD. (2022). World Investment Report 2022: International tax reforms and sustainable investment. United Nations.
UNCTAD. (2024). World Investment Report 2024: Investing in sustainable energy for all. United Nations.
World Economic Forum. (2020). The Global Competitiveness Report 2020.
Xu, B. (2000). Multinational enterprises, technology diffusion, and host country productivity growth. Journal of Development Economics, 62(2), 477–493.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 Somia Ghrara
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
