Asymmetric Oligopoly and Foreign Direct Investment: Implications for Host-Country Tax-Setting
AbstractWe present a duopoly model with heterogeneous firms that vary in cost-efficiency, each of which can choose to serve a foreign market by either exporting or local production. We do so to analyse the effects of a host-country corporate profit tax on both the scale and composition of FDI, and find that: strategic interaction between oligopolistic firms provides for a pattern of FDI that favours cost-inefficiency to the detriment of host-country welfare; and the host-country tax rate can be optimally used to avoid such patterns of FDI and instead promote direct investment by a relatively cost-efficient firm.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal International Economic Journal.
Volume (Year): 26 (2012)
Issue (Month): 2 (June)
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Web page: http://www.tandfonline.com/RIEJ20
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- Mrázová, Monika & Neary, J Peter, 2013.
"Selection Effects With Heterogeneous Firms,"
CEPR Discussion Papers
9288, C.E.P.R. Discussion Papers.
- Monika Mrázová & J. Peter Neary, 2012. "Selection Effects with Heterogeneous Firms," CEP Discussion Papers dp1174, Centre for Economic Performance, LSE.
- Peter Neary & Monika Mrazova, 2011. "Selection Effects with Heterogeneous Firms," Economics Series Working Papers 588, University of Oxford, Department of Economics.
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