Resistance, Redistribution and Investor Friendliness
Poor communities sometimes resist private investment and destroy economic surplus even if the government has the willingness and ability to redistribute. We interpret such acts of resistance as demands for redistribution: destruction contains credible information about how affected groups value surplus, which helps the government in implementing the optimal redistribution policy. Destruction is increasing in the extent of political marginalization of the affected group. While resistance has informational value, it has two distinct costs: it directly reduces surplus and also reduces the investor's incentives to create surplus. The government uses a tax/subsidy on the investor to maximize weighted social surplus, and we show that the possibility of destruction may force the government to be too soft in its negotiations with the investor. We discuss conditions under which the government should ban resistance or should allow resistance but compensate the investor for its losses incurred in order to enhance social welfare.
|Date of creation:||Oct 2011|
|Date of revision:||Jan 2012|
|Contact details of provider:|| Postal: |
Web page: http://www.econ.pitt.edu/
More information through EDIRC
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.:
- Haufler, Andreas & Wooton, Ian, 1997.
"Tax competition for foreign direct investment,"
Discussion Papers, Series II
329, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
- 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.
- 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.
- Saul Estrin & Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2009.
"The Effects of Privatization and Ownership in Transition Economies,"
Journal of Economic Literature,
American Economic Association, vol. 47(3), pages 699-728, September.
- Estrin, Saul & Hanousek, Jan & Kocenda, Evzen & Svejnar, Jan, 2009. "Effects of privatization and ownership in transition economies," Policy Research Working Paper Series 4811, The World Bank.
- Bortolotti, Bernardo & Siniscalco, Domenico, 2004. "The Challenges of Privatization: An International Analysis," OUP Catalogue, Oxford University Press, number 9780199249343, March.
- Alberto Cavaliere, 2006.
"Privatization and Efficiency: from Principals and Agents to Political Economy,"
2006.99, Fondazione Eni Enrico Mattei.
- Alberto Cavaliere & Simona Scabrosetti, 2008. "Privatization And Efficiency: From Principals And Agents To Political Economy," Journal of Economic Surveys, Wiley Blackwell, vol. 22(4), pages 685-710, 09.
- Bård Harstad, 2007. "Harmonization and Side Payments in Political Cooperation," American Economic Review, American Economic Association, vol. 97(3), pages 871-889, June.
When requesting a correction, please mention this item's handle: RePEc:pit:wpaper:454. 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: (Alistair Wilson)
If references are entirely missing, you can add them using this form.