Preferential Trade Agreements and Tax Competition for Foreign Direct Investment
This paper examines how free-trade agreements and customs unions affect the location of foreign direct investment (FDI) and social welfare, taking into account that governments may adjust taxes and external tariffs to compete for FDI. Conditions are identified under which a free-trade agreement leads to FDI and under which this improves welfare. The welfare effect is shown to depend on the relative size of efficiency gains in production and government revenue losses due to tax competition. A free-trade agreement may fail to induce welfare-improving FDI, creating a role for a customs union.
|Date of creation:||2002|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
References listed on IDEAS
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.:
- Horstmann, Ignatius J. & Markusen, James R., 1992. "Endogenous market structures in international trade (natura facit saltum)," Journal of International Economics, Elsevier, vol. 32(1-2), pages 109-129, February.
- Ronald B. Davies, 2000.
"State Tax Competition for Foreign Direct Investment: A Winnable War?,"
University of Oregon Economics Department Working Papers
2000-4, University of Oregon Economics Department, revised 01 Jul 2002.
- Davies, Ronald B., 2005. "State tax competition for foreign direct investment: a winnable war?," Journal of International Economics, Elsevier, vol. 67(2), pages 498-512, December.
- Hines, James R, Jr, 1996.
"Altered States: Taxes and the Location of Foreign Direct Investment in America,"
American Economic Review,
American Economic Association, vol. 86(5), pages 1076-94, December.
- James R. Hines Jr., 1993. "Altered States: Taxes and the Location of Foreign Direct Investment in America," NBER Working Papers 4397, National Bureau of Economic Research, Inc.
- J Peter Neary, 2001.
"Foreign Direct Iinvestment and the Single Market,"
200124, School Of Economics, University College Dublin.
- Nigel Pain, 1996.
"Continental Drift: European Integration and the Location of UK Foreign Direct Investment,"
NIESR Discussion Papers
230, National Institute of Economic and Social Research.
- Pain, Nigel, 1997. "Continental Drift: European Integration and the Location of U.K. Foreign Direct Investment," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(0), pages 94-117, Supplemen.
- Haufler, Andreas & Wooton, Ian, 1999.
"Country size and tax competition for foreign direct investment,"
Munich Reprints in Economics
20408, University of Munich, Department of Economics.
- Haufler, Andreas & Wooton, Ian, 1999. "Country size and tax competition for foreign direct investment," Journal of Public Economics, Elsevier, vol. 71(1), pages 121-139, January.
- Andreas Haufler & Ian Wooton, . "Country Size and Tax Competition for Foreign Direct Investment," Working Papers 9702, Business School - Economics, University of Glasgow.
- Motta, Massimo & Norman, George, 1996.
"Does Economic Integration Cause Foreign Direct Investment?,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 757-83, November.
- Massimo Motta & George Norman, 1993. "Does economic integration cause foreign direct investment?," Economics Working Papers 28, Department of Economics and Business, Universitat Pompeu Fabra.
- Agnès Bénassy-Quéré & Lionel Fontagné & Amina Lahrèche-Revil, 2000. "Foreign Direct Investment and the Prospects for Tax Co-Ordination in Europe," Working Papers 2000-06, CEPII research center.
- Eckard Janeba, .
"Tax Competition in Imperfectly Competitive Markets,"
Discussion Paper Serie A
513, University of Bonn, Germany.
- Janeba, Eckhard, 1998. "Tax competition in imperfectly competitive markets," Journal of International Economics, Elsevier, vol. 44(1), pages 135-153, February.
- Bond, Eric W & Guisinger, Stephen E, 1985. "Investment Incentives as Tariff Substitutes: A Comprehensive Measure of Protection," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 91-97, February.
- Wilfred J. Ethier, 1998. "Regionalism in a Multilateral World," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1214-1245, December.
- Keen, Michael, 2001. "Preferential Regimes Can Make Tax Competition Less Harmful," National Tax Journal, National Tax Association, vol. 54(n. 4), pages 757-62, December.
- Barros, Pedro P & Cabral, Luis, 2000. "Competing for Foreign Direct Investment," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 360-71, May.
- Gordon, Roger H. & Hines, James Jr, 2002.
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 28, pages 1935-1995
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
- James R. Markusen, 2004.
"Multinational Firms and the Theory of International Trade,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262633078, June.
- Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
- 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.
- 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.
- Bond, Eric W. & Samuelson, Larry, 1989. "Bargaining with commitment, choice of techniques, and direct foreign investment," Journal of International Economics, Elsevier, vol. 26(1-2), pages 77-97, February.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_763. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)
If references are entirely missing, you can add them using this form.