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Subsidy Competition and the Mode of FDI: Acquisition vs Greenfield

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  • Facundo Albornoz

Abstract

We model subsidy competition for a foreign MNC’s investment in two potential PTA partners. Taking into account acquisitions as an alternative investment mode weakens the case for subsidising greenfield investment. Competition between countries results in welfare losses, even more so if spillovers from the MNC’s presence exist. Hence in many cases a ban on subsidies may increase welfare. In addition, we show how trade integration affects the prospects for social waste.

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File URL: ftp://ftp.bham.ac.uk/pub/RePEc/pdf/Ack2007.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number 05-15R.

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Length: 32 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:bir:birmec:05-15r

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Postal: Edgbaston, Birmingham, B15 2TT
Web page: http://www.economics.bham.ac.uk
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Related research

Keywords: Subsidy Competition; FDI; Greenfield Investment; Mergers and Acquisitions; Regional Integration; Spillovers;

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References

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Cited by:
  1. Kai Zhao, 2011. "Entry mode choice and target firm selection: private and collective incentive analysis," Working Papers halshs-00856139, HAL.

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