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Subsidy competition and the mode of FDI

Author

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  • Albornoz, Facundo
  • Corcos, Gregory
  • Kendall, Toby

Abstract

We model subsidy competition for a foreign MNC's investment in two trading partners. Taking into account acquisitions as an alternative investment mode weakens the case for subsidising greenfield investment. Competition between countries results in welfare losses, which are reinforced by positive externalities from the MNC's presence and regional integration. The results also apply to situations where the acquisition price accounts for the possibility of subsidies and when governments use acquisition subsidies as an alternative to greenfield subsidies.

Suggested Citation

  • Albornoz, Facundo & Corcos, Gregory & Kendall, Toby, 2009. "Subsidy competition and the mode of FDI," Regional Science and Urban Economics, Elsevier, vol. 39(4), pages 489-501, July.
  • Handle: RePEc:eee:regeco:v:39:y:2009:i:4:p:489-501
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    References listed on IDEAS

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    Cited by:

    1. repec:tep:teppwp:wp1206 is not listed on IDEAS
    2. Kai Zhao, 2011. "Entry mode choice and target firm selection: private and collective incentive analysis," Working Papers halshs-00856139, HAL.
    3. Kai Zhao, 2012. "Entry mode choice and target firm selection: private and collective incentive analysis," TEPP Working Paper 2012-06, TEPP.
    4. repec:eee:renene:v:121:y:2018:i:c:p:420-428 is not listed on IDEAS
    5. Instefjord, Norvald & Nawosah, Vivekanand & Yang, Pei, 2016. "A contingent claims analysis of optimal investment subsidy," Journal of Economic Dynamics and Control, Elsevier, vol. 73(C), pages 354-372.

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