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Preferential Trade Agreements and Tax Competition for Foreign Direct Investment Author info | Abstract | Publisher info | Download info | Related research | Statistics Horst Raff ()
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This 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.
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number
CESifo Working Paper No. 763.
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Date of creation: 2002Date of revision:
Handle: RePEc:ces:ceswps:_763Contact details of provider: Postal: Poschingerstrasse 5, 81679 Munich Phone: +49 (89) 9224-0 Fax: +49 (89) 985369 Web page: http://www.cesifo.de
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Keywords: preferential trade agreements ; tax competition ; multinational enterprises ; Other versions of this item:
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references Cited by : (explanations , 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.)
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