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Locational Competition: A Neglected Paradigm in the International Division of Labour

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  • Horst Siebert

Abstract

Krugman's verdict that competitiveness of countries is a largely meaningless concept is a serious misjudgement of the economics profession. Countries compete for the mobile factors of production, most importantly for capital and technology. The exit‐option of these factors and of firms changes the calculus of national governments. This paper sets out the main elements of the concept of competition between locations – locational competition – and analyses its impact on welfare and employment of the capital‐exporting country. It also looks at whether competition between countries necessarily results in a race to the bottom or whether it can function as a controlling mechanism for governments and as a discovery device. The paper discusses under which conditions common rules are needed to reduce transaction costs and to prevent strategic, opportunistic behaviour of countries and which common rules thus reduce transaction costs. Finally, it deals with the question whether one institutional equilibrium in the world economy can be expected or whether many national equilibriums can coexist.

Suggested Citation

  • Horst Siebert, 2006. "Locational Competition: A Neglected Paradigm in the International Division of Labour," The World Economy, Wiley Blackwell, vol. 29(2), pages 137-159, February.
  • Handle: RePEc:bla:worlde:v:29:y:2006:i:2:p:137-159
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    File URL: https://doi.org/10.1111/j.1467-9701.2006.00775.x
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    References listed on IDEAS

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    1. Marin, Dalia, 2004. "'A Nation of Poets and Thinkers' - Less So with Eastern Enlargement? Austria and Germany," Discussion Papers in Economics 329, University of Munich, Department of Economics.
    2. David Mayer‐Foulkes & Peter Nunnenkamp, 2009. "Do Multinational Enterprises Contribute to Convergence or Divergence? A Disaggregated Analysis of US FDI," Review of Development Economics, Wiley Blackwell, vol. 13(2), pages 304-318, May.
    3. Marin, Dalia, 2004. "‘A Nation of Poets and Thinkers’ - Less So with Eastern Enlargement? Austria and Germany," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 77, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    4. Jozef Konings & Alan Murphy, 2001. "Do Multinational Enterprises Substitute Parent Jobs for Foreign Ones? Evidence from Firm Level Panel Data," LICOS Discussion Papers 10001, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    5. Wilson, John Douglas, 1987. "Trade, Capital Mobility, and Tax Competition," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 835-856, August.
    6. Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April.
    7. Siebert, Horst & Koop, Michael J, 1993. "Institutional Competition versus Centralization: Quo Vadis Europe?," Oxford Review of Economic Policy, Oxford University Press, vol. 9(1), pages 15-30, Spring.
    8. Konings, Jozef & Murphy, Alan, 2001. "Do Multinational Enterprises Substitute Parent Jobs for Foreign Ones? Evidence from European Firm Level Panel Data," CEPR Discussion Papers 2972, C.E.P.R. Discussion Papers.
    9. Konings, Jozef, 2004. "The employment effects of foreign direct investment," EIB Papers 4/2004, European Investment Bank, Economics Department.
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    Citations

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    Cited by:

    1. Horst Siebert, 2006. "Where do we go after Hong Kong?," International Economics and Economic Policy, Springer, vol. 3(1), pages 7-10, April.
    2. repec:wfo:wstudy:60625 is not listed on IDEAS
    3. repec:wfo:wstudy:42430 is not listed on IDEAS
    4. Duanmu, Jing-Lin, 2014. "A race to lower standards? Labor standards and location choice of outward FDI from the BRIC countries," International Business Review, Elsevier, vol. 23(3), pages 620-634.
    5. repec:wfo:wstudy:27446 is not listed on IDEAS

    More about this item

    JEL classification:

    • F - International Economics
    • H - Public Economics
    • J - Labor and Demographic Economics

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