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Subsidy Competition and the Mode of FDI: Acquisition vs Greenfield

Author

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  • Facundo Albornoz
  • Gregory Corcos
  • Toby Kendall

Abstract

We model subsidy competition for a foreign MNC’s investment in two potential PTA partners. Taking into account acquisitions as an alternative investment mode weakens the case for subsidising greenfield investment. Competition between countries results in welfare losses, even more so if spillovers from the MNC’s presence exist. Hence in many cases a ban on subsidies may increase welfare. In addition, we show how trade integration affects the prospects for social waste.

Suggested Citation

  • Facundo Albornoz & Gregory Corcos & Toby Kendall, 2007. "Subsidy Competition and the Mode of FDI: Acquisition vs Greenfield," Discussion Papers 05-15, Department of Economics, University of Birmingham.
    • Handle: RePEc:bir:birmec:05-15
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    References listed on IDEAS

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    Cited by:

    1. Kai Zhao, 2011. "Entry mode choice and target firm selection: private and collective incentive analysis," Working Papers halshs-00856139, HAL.

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    More about this item

    Keywords

    Subsidy Competition; FDI; Greenfield Investment; Mergers and Acquisitions; Regional Integration; Spillovers;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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