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Public Investment, Taxation and Transfer of Technology

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  • Kollias, Iraklis
  • Marjit, Sugata
  • Michelacakis, Nickolas

Abstract

A low wage developing economy (South) is interested in accessing and attracting superior technology from a high wage developed economy (North) with firms having heterogeneous quality of technology. To improve upon the initial market equilibrium, which shows that relatively inefficient technologies will move to the South, the host government invests in infrastructure financed through taxing the foreign firms. We discuss the problem of existence of such a tax-transfer mechanism within a balanced budget framework. We argue that such a policy can increase tax revenue as well as instigate the transfer of better quality technology. It turns out that this policy is more likely to be successful when the production concerns high value, high price products in low wage economies. Our results improve upon the conventional strategy of a tax break.

Suggested Citation

  • Kollias, Iraklis & Marjit, Sugata & Michelacakis, Nickolas, 2017. "Public Investment, Taxation and Transfer of Technology," MPRA Paper 78853, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:78853
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    References listed on IDEAS

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    1. Krugman, Paul, 1979. "A Model of Innovation, Technology Transfer, and the World Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 253-266, April.
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    14. Michelacakis, Nickolas, 2014. "A model of technology transfer under taxation," MPRA Paper 58632, University Library of Munich, Germany.
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    Cited by:

    1. Rajat Acharyya & Sugata Marjit, 2023. "Why trade when you can transfer the technology: Revisiting Smith and Ricardo," Review of International Economics, Wiley Blackwell, vol. 31(4), pages 1508-1527, September.

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    More about this item

    Keywords

    public investment; tax; high-low wage economy; technology transfer; model;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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