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Inter-region Competition for FDI

Author

Listed:
  • Osiris Parcero

Abstract

This paper models inter-regional competition for FDI and optimal government policy intervention to protect the national interest. Two regional authorities bargain with a single multinational over where it will locate. This potentially leads to excessive competition between the regions, favouring the multinational. The federal government obviously wants to limit such competition but lacks information on comparative advantage. This paper examines its optimal policy. Among the main results we have the following two: First, the federal government would use tax policy to create asymmetries even when the underlying structure is symmetrical. Second, there are situations where, even though one MNC is more productive in one region, it is optimal for the country to make it go to the other one.

Suggested Citation

  • Osiris Parcero, 2004. "Inter-region Competition for FDI," The Centre for Market and Public Organisation 04/100, The Centre for Market and Public Organisation, University of Bristol, UK.
    • Handle: RePEc:bri:cmpowp:04/100
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    File URL: http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp100.pdf
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    References listed on IDEAS

    as
    1. Chris Doyle & Sweder Wijnbergen, 1994. "Taxation of foreign multinationals: A sequential bargaining approach to tax holidays," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 1(3), pages 211-225, October.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Subsidy competition; FDI; bargaining;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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