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

  • Andreas Hoefele

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

  • Ben Ferrett

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

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.

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Paper provided by School of Business and Economics, Loughborough University in its series Centre for Firms in the Global Economy (CFGE) Discussion Papers with number 2014_01.

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Date of creation: May 2014
Date of revision: May 2014
Handle: RePEc:lbo:lbcfge:2014_01
Contact details of provider: Postal: Loughborough, Leicestershire, LE11 3TU
Phone: +44 (0) 1509 222701
Fax: +44 (0) 1509 223910
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  1. Fumagalli, Chiara, 2003. "On the welfare effects of competition for foreign direct investments," European Economic Review, Elsevier, vol. 47(6), pages 963-983, December.
  2. 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.
  3. 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.
  4. Ben Ferrett & Ian Wooton, 2010. "Tax competition and the international distribution of firm ownership: an invariance result," International Tax and Public Finance, Springer, vol. 17(5), pages 518-531, October.
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