Subsidy competition and the mode of FDI
AbstractWe model subsidy competition for a foreign MNC's investment in two trading partners. Taking into account acquisitions as an alternative investment mode weakens the case for subsidising greenfield investment. Competition between countries results in welfare losses, which are reinforced by positive externalities from the MNC's presence and regional integration. The results also apply to situations where the acquisition price accounts for the possibility of subsidies and when governments use acquisition subsidies as an alternative to greenfield subsidies.
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Bibliographic InfoArticle provided by Elsevier in its journal Regional Science and Urban Economics.
Volume (Year): 39 (2009)
Issue (Month): 4 (July)
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Web page: http://www.elsevier.com/locate/regec
Subsidy competition FDI Greenfield investment Mergers and acquisitions Regional integration Positive externalities;
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