Fiscal Federalism and Competitive Bidding for Foreign Investment as a Multistage Game
AbstractThis paper models the behavior of states in a federal country wising to attract foreign firms to locate within their own individual jurisdictions. The essential intertemporal character of this decision is modeled as a multi-stage game to attract such foreign investment in these states. It is found that, when states with unequal political or economic infrastructure compete, the resulting Nash equilibrium profiles are inefficient. Under certain conditions, states that have won once, can â€œallowâ€ a rival to win in a subsequent stage. The resulting Nash Equilibrium is more efficient. If the option of â€œallowingâ€ a rival to win is not available, then states may resort to â€œsuicideâ€ strategies defined as outcomes created by history of losses.
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 The Australian National University, Arndt-Corden Department of Economics in its series Departmental Working Papers with number 2013-04.
Length: 35 pages
Date of creation: 2013
Date of revision:
Contact details of provider:
Postal: Crawford Building, Lennox Crossing, Building #132, Canberra ACT 0200
Phone: +61 2 6125 4705
Fax: +61 2 6125 5448
Web page: https://crawford.anu.edu.au/acde/publications/
More information through EDIRC
Fiscal Federalism; Multi stage games; suicide strategies.;
Find related papers by JEL classification:
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-27 (All new papers)
- NEP-GTH-2013-04-27 (Game Theory)
- NEP-PBE-2013-04-27 (Public Economics)
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.:
- Yang, Yong, 1996. "Tax competition under the threat of capital flight," Economics Letters, Elsevier, vol. 53(3), pages 323-329, December.
- Bond, Eric W & Samuelson, Larry, 1986. "Tax Holidays as Signals," American Economic Review, American Economic Association, vol. 76(4), pages 820-26, September.
- King, I. & McAfee, R.P. & Welling, L., 1990. "Industrial Blackmail," Papers 130, Calgary - Department of Economics.
- Trond Olsen & Petter Osmundsen, 2000.
"Strategic Tax Competition; Implications of National Ownership,"
CESifo Working Paper Series
281, CESifo Group Munich.
- Olsen, Trond E. & Osmundsen, Petter, 2001. "Strategic tax competition; implications of national ownership," Journal of Public Economics, Elsevier, vol. 81(2), pages 253-277, August.
- Olsen, T.E. & Osmundsen, P., 1998. "Strategic Tax Competition; Implications of National Ownership," Papers 11/98, Norwegian School of Economics and Business Administration-.
- Janeba, Eckhard, 1998.
"Tax competition in imperfectly competitive markets,"
Journal of International Economics,
Elsevier, vol. 44(1), pages 135-153, February.
- Eckard Janeba, . "Tax Competition in Imperfectly Competitive Markets," Discussion Paper Serie A 513, University of Bonn, Germany.
- Haufler, Andreas, 1998.
"Asymmetric commodity tax competition ‐ comment on de Crombrugghe and Tulkens,"
Munich Reprints in Economics
20389, University of Munich, Department of Economics.
- Haufler, Andreas, 1998. "Asymmetric commodity tax competition -- comment on de Crombrugghe and Tulkens," Journal of Public Economics, Elsevier, vol. 67(1), pages 135-144, January.
- Sebastian Kessing & Kai Konrad & Christos Kotsogiannis, 2009. "Federalism, weak institutions and the competition for foreign direct investment," International Tax and Public Finance, Springer, vol. 16(1), pages 105-123, February.
- Lorz, Oliver, 1998.
"Capital mobility, tax competition, and lobbying for redistributive capital taxation,"
European Journal of Political Economy,
Elsevier, vol. 14(2), pages 265-279, May.
- Lorz, Jens Oliver, 1996. "Capital mobility, tax competition, and lobbying for redistributive capital taxation," Kiel Working Papers 779, Kiel Institute for the World Economy.
- Jeremy Edwards & Michael Keen, 1994.
"Tax competition and Leviathon,"
IFS Working Papers
W94/07, Institute for Fiscal Studies.
- Ravi Kanbur & Michael Keen, 1991.
"Jeux Sans Frontieres: Tax Competition and Tax Coordination when Countries Differ in Size,"
819, Queen's University, Department of Economics.
- Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, vol. 83(4), pages 877-92, September.
- 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.
- 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.
- Michael Keen & Christos Kotsogiannis, 2003. "Leviathan and Capital Tax Competition in Federations," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 177-199, 04.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.