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On The Efficiency Of Fiscal Competition For Fdi When Incumbent Firms Are Foreign-Owned

Author

Listed:
  • Andreas Hoefele

    (School of Business and Economics, Loughborough University, UK)

  • Ben Ferrett

    (School of Business and Economics, Loughborough University, UK)

Abstract

We show that the international distribution of ownership of the incumbent firms within a host region matters for the efficiency of the fiscal competition between the region’s constituent countries for a new FDI project. If incumbent firms are owned entirely within the host region, then the new plant’s location will be efficient. However, when incumbent firms are owned outside the host region and the degree of such extra-regional ownership varies substantially across the competing host countries – as it does in the data – then inefficient locations might win contests for new plants.

Suggested Citation

  • Andreas Hoefele & Ben Ferrett, 2014. "On The Efficiency Of Fiscal Competition For Fdi When Incumbent Firms Are Foreign-Owned," Centre for Firms in the Global Economy (CFGE) Discussion Papers 2014_01, School of Business and Economics, Loughborough University, revised May 2014.
  • Handle: RePEc:lbo:lbcfge:2014_01
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    References listed on IDEAS

    as
    1. Holger Görg & David Greenaway, 2004. "Much Ado about Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," World Bank Research Observer, World Bank Group, vol. 19(2), pages 171-197.
    2. Fumagalli, Chiara, 2003. "On the welfare effects of competition for foreign direct investments," European Economic Review, Elsevier, vol. 47(6), pages 963-983, December.
    3. Ben Ferrett & Ian Wooton, 2010. "Tax competition and the international distribution of firm ownership: an invariance result," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(5), pages 518-531, October.
    4. Bjorvatn, Kjetil & Eckel, Carsten, 2006. "Policy competition for foreign direct investment between asymmetric countries," European Economic Review, Elsevier, vol. 50(7), pages 1891-1907, October.
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    Cited by:

    1. Sanjo, Yasuo, 2015. "The role of firm ownership in policy competition for foreign direct investment between asymmetric countries," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 110-121.

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    More about this item

    Keywords

    FDI; fiscal competition; efficiency; foreign ownership.;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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