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Estimating the rivalness of state-level inward FDI

Author

Listed:
  • Marius Brülhart

    (Université de Lausanne & Centre for Economic Policy Research (CEPR))

  • Kurt Schmidheiny

    (Universität Basel & Centre for Economic Policy Research (CEPR) & CESifo)

Abstract

Decentralized fiscal decision making is more likely to be optimal if regional tax bases are non-rival, in the sense that one region's gain is no other relevant region's loss. We develop a method for estimating the rivalness of tax bases using the underlying structures of the conditional logit, Poisson and nested logit models. We use this method to estimate the effect of state-level capital taxation on U.S. inward foreign direct investment. While the results are rather noisy, the assumption of perfect non-rivalenss can in some cases be rejected, but the assumption of perfect rivalness cannot. Competition over FDI across U.S. states may well be a zero-sum game.

Suggested Citation

  • Marius Brülhart & Kurt Schmidheiny, 2011. "Estimating the rivalness of state-level inward FDI," Working Papers 2011/36, Institut d'Economia de Barcelona (IEB).
    • Handle: RePEc:ieb:wpaper:doc2011-36
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    References listed on IDEAS

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    Cited by:

    1. Steven Brakman & Charles Marrewijk & Mark Partridge, 2015. "Local Consequences Of Global Production Processes," Journal of Regional Science, Wiley Blackwell, vol. 55(1), pages 1-9, January.
    2. Brülhart, Marius & Bucovetsky, Sam & Schmidheiny, Kurt, 2015. "Taxes in Cities," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1123-1196, Elsevier.
    3. Azémar, Céline & Desbordes, Rodolphe & Wooton, Ian, 2020. "Is international tax competition only about taxes? A market-based perspective," Journal of Comparative Economics, Elsevier, vol. 48(4), pages 891-912.

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    More about this item

    Keywords

    firm location; FDI; conditional logit; nested logit; poisson count model;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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