International Competition for R&D Investments (new title: Spillovers and international competition for investments)
AbstractTwo jurisdictions compete to attract shares of the R&D investment budget of a large multinational enterprise, whose investments potentially confer positive spillovers on national firms. The firm contributes to local welfare by these spillovers (should they materialize), by tax payments and by dividends paid to local investors. The firm has private information both about its efficiency and about spillovers, and in particular whether the latter do exist or not. It is shown that strategic tax competition may lead to overinvestments relative to the first-best allocation, that the excessive investments occur in the country where the positive spillover effects are lowest, and that they are most severe for the least efficient firms.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 316.
Date of creation: 2000
Date of revision:
Tax competition; R&D; common agency;
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