Preferential Trade Agreements and Tax Competition for Foreign Direct Investment
AbstractThis paper examines how free-trade agreements and customs unions affect the location of foreign direct investment (FDI) and social welfare, taking into account that governments may adjust taxes and external tariffs to compete for FDI. Conditions are identified under which a free-trade agreement leads to FDI and under which this improves welfare. The welfare effect is shown to depend on the relative size of efficiency gains in production and government revenue losses due to tax competition. A free-trade agreement may fail to induce welfare-improving FDI, creating a role for a customs union.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 763.
Date of creation: 2002
Date of revision:
preferential trade agreements; tax competition; multinational enterprises;
Other versions of this item:
- Raff, Horst, 2004. "Preferential trade agreements and tax competition for foreign direct investment," Journal of Public Economics, Elsevier, Elsevier, vol. 88(12), pages 2745-2763, December.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Agnès Bénassy-Quéré & Lionel Fontagné & Amina Lahrèche-Revil, 2000. "Foreign Direct Investment and the Prospects for Tax Co-Ordination in Europe," Working Papers 2000-06, CEPII research center.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
- Wilfred J. Ethier, 1998. "Regionalism in a Multilateral World," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(6), pages 1214-1245, December.
- Horstmann, Ignatius J. & Markusen, James R., 1992. "Endogenous market structures in international trade (natura facit saltum)," Journal of International Economics, Elsevier, Elsevier, vol. 32(1-2), pages 109-129, February.
- Barros, Pedro P & Cabral, Luis, 2000. "Competing for Foreign Direct Investment," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 360-71, May.
- J Peter Neary, 2001.
"Foreign Direct Iinvestment and the Single Market,"
Working Papers, School Of Economics, University College Dublin
200124, School Of Economics, University College Dublin.
- Neary, J Peter, 2002. "Foreign Direct Investment and the Single Market," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3419, C.E.P.R. Discussion Papers.
- J. Peter Neary, 2001. "Foreign Direct Investment and the Single Market," Development Working Papers 160, Centro Studi Luca d\'Agliano, University of Milano.
- Bond, Eric W & Guisinger, Stephen E, 1985. "Investment Incentives as Tariff Substitutes: A Comprehensive Measure of Protection," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 91-97, February.
- Andreas Haufler & Ian Wooton, .
"Country Size and Tax Competition for Foreign Direct Investment,"
Working Papers, Business School - Economics, University of Glasgow
9702, Business School - Economics, University of Glasgow.
- Haufler, Andreas & Wooton, Ian, 1999. "Country size and tax competition for foreign direct investment," Journal of Public Economics, Elsevier, Elsevier, vol. 71(1), pages 121-139, January.
- Haufler, Andreas & Wooton, Ian, 1999. "Country size and tax competition for foreign direct investment," Munich Reprints in Economics, University of Munich, Department of Economics 20408, University of Munich, Department of Economics.
- Ronald B. Davies, 2000.
"State Tax Competition for Foreign Direct Investment: A Winnable War?,"
University of Oregon Economics Department Working Papers, University of Oregon Economics Department
2000-4, University of Oregon Economics Department, revised 01 Jul 2002.
- Davies, Ronald B., 2005. "State tax competition for foreign direct investment: a winnable war?," Journal of International Economics, Elsevier, Elsevier, vol. 67(2), pages 498-512, December.
- Hines, James R, Jr, 1996.
"Altered States: Taxes and the Location of Foreign Direct Investment in America,"
American Economic Review, American Economic Association,
American Economic Association, vol. 86(5), pages 1076-94, December.
- James R. Hines Jr., 1993. "Altered States: Taxes and the Location of Foreign Direct Investment in America," NBER Working Papers 4397, National Bureau of Economic Research, Inc.
- Chris Doyle & Sweder Wijnbergen, 1994.
"Taxation of foreign multinationals: A sequential bargaining approach to tax holidays,"
International Tax and Public Finance, Springer,
Springer, vol. 1(3), pages 211-225, October.
- Doyle, Christopher & van Wijnbergen, Sweder, 1984. "Taxation of Foreign Multinationals: A Sequential Bargaining Approach to Tax Holidays," CEPR Discussion Papers, C.E.P.R. Discussion Papers 25, C.E.P.R. Discussion Papers.
- Bond, Eric W. & Samuelson, Larry, 1989. "Bargaining with commitment, choice of techniques, and direct foreign investment," Journal of International Economics, Elsevier, Elsevier, vol. 26(1-2), pages 77-97, February.
- Pain, Nigel, 1997. "Continental Drift: European Integration and the Location of U.K. Foreign Direct Investment," The Manchester School of Economic & Social Studies, University of Manchester, University of Manchester, vol. 65(0), pages 94-117, Supplemen.
- Keen, Michael, 2001. "Preferential Regimes Can Make Tax Competition Less Harmful," National Tax Journal, National Tax Association, vol. 54(n. 4), pages 757-62, December.
- Motta, Massimo & Norman, George, 1996.
"Does Economic Integration Cause Foreign Direct Investment?,"
International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 757-83, November.
- Massimo Motta & George Norman, 1993. "Does economic integration cause foreign direct investment?," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 28, Department of Economics and Business, Universitat Pompeu Fabra.
- Gordon, Roger H. & Hines, James Jr, 2002.
Handbook of Public Economics, Elsevier,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 28, pages 1935-1995
- Janeba, Eckhard, 1998.
"Tax competition in imperfectly competitive markets,"
Journal of International Economics, Elsevier,
Elsevier, vol. 44(1), pages 135-153, February.
- Eckard Janeba, . "Tax Competition in Imperfectly Competitive Markets," Discussion Paper Serie A, University of Bonn, Germany 513, University of Bonn, Germany.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.