Foreign Direct Investment, Local Content Requirement, and Profit Taxation
AbstractThe authors develop a partial equilibrium model of foreign direct investment (FDI) in which identical foreign firms locate themselves in a host country to compete in an oligopolistic market for a nontradeable commodity. The host country, assumed to be small in the market for FDI, makes use of two instruments, viz., a profit tax and a local content requirement, to compete for FDI in the international market. The authors assume the existence of unemployment in the host country. The structure of optimal instruments and their relationship to the number, and the relative efficiency levels, of the domestic firms are established.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 108 (1998)
Issue (Month): 447 (March)
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Other versions of this item:
- Lahiri, S & Ono, Y, 1997. "Foreign Direct Investment, Local Content Requirement, and Profit Taxation," ISER Discussion Paper 0438, Institute of Social and Economic Research, Osaka University.
- F2 - International Economics - - International Factor Movements and International Business
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
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- Martin Richardson, 1998. "Foreign entry and domestic welfare," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(2), pages 250-262, June.
- Lahiri, Sajal & Mesa, Fernando, 2006. "Local content requirement on foreign direct investment under exchange rate volatility," International Review of Economics & Finance, Elsevier, vol. 15(3), pages 346-363.
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- Toshihiro Matsumura & Noriaki Matsushima, 2009. "A small firm leads to curious outcomes: Social surplus, consumer surplus, and R&D activities," ISER Discussion Paper 0742, Institute of Social and Economic Research, Osaka University.
- Amy Glass & Kamal Saggi, 1999. "FDI Selection: Crowding Out and Distributional Effects," Working Papers 99-03, Ohio State University, Department of Economics.
- Jung Hur & Yohanes E. Riyanto, 2004. "On the Role of Local Content Requirement in Defusing the Threat of Quid-Pro-Quo FDI," Econometric Society 2004 Far Eastern Meetings 641, Econometric Society.
- Qiu, Larry D. & Tao, Zhigang, 2001. "Export, foreign direct investment, and local content requirement," Journal of Development Economics, Elsevier, vol. 66(1), pages 101-125, October.
- Kazuhiro Takauchi, 2011. "Rules of origin and international R&D rivalry," Economics Bulletin, AccessEcon, vol. 31(3), pages 2319-2332.
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- Muhammad Azam & Muhammad Khan & Nasir Iqbal, 2012. "Impact of Political Risk and Uncertainty on FDI in South Asia," Transition Studies Review, Springer, vol. 19(1), pages 59-77, September.
- Toshihiro Matsumura, 2003. "Strategic R and D investments with uncertainty," Economics Bulletin, AccessEcon, vol. 12(1), pages 1-7.
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