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, 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.:
- James R. Hines Jr., 1997.
"Altered States: Taxes and the Location of Foreign Direct Investment in America,"
NBER Working Papers
4397, National Bureau of Economic Research, Inc.
- Hines, James R, Jr, 1996. "Altered States: Taxes and the Location of Foreign Direct Investment in America," American Economic Review, American Economic Association, vol. 86(5), pages 1076-94, December.
- Neary, J Peter, 2002.
"Foreign Direct Investment and the Single Market,"
CEPR 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.
- J Peter Neary, 2001. "Foreign Direct Iinvestment and the Single Market," Working Papers 200124, School Of Economics, University College Dublin.
- Massimo Motta & George Norman, 1993.
"Does economic integration cause foreign direct investment?,"
Economics Working Papers
28, Department of Economics and Business, Universitat Pompeu Fabra.
- 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, vol. 37(4), pages 757-83, November.
- Nigel Pain, 1996.
"Continental Drift: European Integration and the Location of UK Foreign Direct Investment,"
NIESR Discussion Papers
107, National Institute of Economic and Social Research.
- 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, vol. 65(0), pages 94-117, Supplemen.
- Doyle, Christopher & van Wijnbergen, Sweder, 1984.
"Taxation of Foreign Multinationals: A Sequential Bargaining Approach to Tax Holidays,"
CEPR Discussion Papers
25, C.E.P.R. Discussion Papers.
- Chris Doyle & Sweder Wijnbergen, 1994. "Taxation of foreign multinationals: A sequential bargaining approach to tax holidays," International Tax and Public Finance, Springer, vol. 1(3), pages 211-225, October.
- Eckard Janeba, .
"Tax Competition in Imperfectly Competitive Markets,"
Discussion Paper Serie A
513, University of Bonn, Germany.
- Janeba, Eckhard, 1998. "Tax competition in imperfectly competitive markets," Journal of International Economics, Elsevier, vol. 44(1), pages 135-153, February.
- Roger H. Gordon & James R. Hines Jr., 2002.
NBER Working Papers
8854, National Bureau of Economic Research, Inc.
- Ronald B. Davies, 2000.
"State Tax Competition for Foreign Direct Investment: A Winnable War?,"
University of Oregon Economics Department Working Papers
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, vol. 67(2), pages 498-512, December.
- Barros, Pedro P & Cabral, Luis, 2000. "Competing for Foreign Direct Investment," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 360-71, May.
- Haufler, Andreas & Wooton, Ian, 1999.
"Country size and tax competition for foreign direct investment,"
Journal of Public Economics,
Elsevier, vol. 71(1), pages 121-139, January.
- Andreas Haufler & Ian Wooton, . "Country Size and Tax Competition for Foreign Direct Investment," Working Papers 9702, Business School - Economics, University of Glasgow.
- 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 .
- 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.
- Wilfred J. Ethier, 1998. "Regionalism in a Multilateral World," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1214-1245, December.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June Cita.
- Bond, Eric W. & Samuelson, Larry, 1989. "Bargaining with commitment, choice of techniques, and direct foreign investment," Journal of International Economics, Elsevier, vol. 26(1-2), pages 77-97, February.
- 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.
- Horstmann, Ignatius J. & Markusen, James R., 1992. "Endogenous market structures in international trade (natura facit saltum)," Journal of International Economics, Elsevier, vol. 32(1-2), pages 109-129, February.
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 references are entirely missing, you can add them using this form.