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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- Seiichi Katayama & Sajal Lahiri & Eiichi Tomiura, 2005. "Cost Heterogeneity and the Destination of Foreign Direct Investment," Discussion Paper Series 166, Research Institute for Economics & Business Administration, Kobe University.
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