IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Silver Lining of Red Tape

  • Ronald B Davies

    (University College Dublin)

An increasing number of international agreements require “nondiscrimination” from their participants, i.e. the government of one country cannot treat foreign firms differently from domestic firms. This is at odds with a government’s desire to benefit its own citizens rather than foreign citizens. I show that the use of red tape – a wasteful application process – can achieve de-facto discrimination. Key to this result is firm heterogeneity since, although the red tape cost is constant across firms, only those sufficiently benefiting from an incentive program will find it worth the cost of applying. If the benefits of targeting subsidies outweigh the burden of red tape on domestic firms, red tape will be used.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ucd.ie/t4cms/wp10_18.pdf
File Function: First version, 2010
Download Restriction: no

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 201018.

as
in new window

Length: 32 pages
Date of creation: 25 May 2010
Date of revision:
Handle: RePEc:ucn:wpaper:201018
Contact details of provider: Postal: UCD, Belfield, Dublin 4
Phone: +353-1-7067777
Fax: +353-1-283 0068
Web page: http://www.ucd.ie/economics

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.:

as in new window
  1. Desai, Mihir A. & Hines Jr., James R., 2008. "Market reactions to export subsidies," Journal of International Economics, Elsevier, vol. 74(2), pages 459-474, March.
  2. Kyle Bagwell & Robert W. Staiger, 2012. "Profit Shifting And Trade Agreements In Imperfectly Competitive Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(4), pages 1067-1104, November.
  3. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
  4. Becker, Johannes & Fuest, Clemens, 2012. "Transfer pricing policy and the intensity of tax rate competition," Economics Letters, Elsevier, vol. 117(1), pages 146-148.
  5. Ciccone, Antonio & Papaioannou, Elias, 2007. "Red tape and delayed entry," Working Paper Series 0758, European Central Bank.
  6. Robert Gillanders & Karl Whelan, 2010. "Open For Business? Institutions, Business Environment and Economic Development," Working Papers 201040, School Of Economics, University College Dublin.
  7. Ronald B. Davies & Johannes Voget, 2010. "Tax Competition in an Expanding European Union," GEE Papers 0033, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação, revised Jan 2011.
  8. Smarzynska, Beata K., 2002. "Does foreign direct investment increase the productivity of domestic firms : in search of spillovers through backward linkages," Policy Research Working Paper Series 2923, The World Bank.
  9. Braid, Ralph M., 2005. "Tax competition, tax exporting and higher-government choice of tax instruments for local governments," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1789-1821, September.
  10. Markusen, James R & Maskus, Keith E, 2002. "Discriminating among Alternative Theories of the Multinational Enterprise," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 694-707, November.
  11. Andreas Haufler & Ian Wooton, . "Country Size and Tax Competition for Foreign Direct Investment," Working Papers 9702, Business School - Economics, University of Glasgow.
  12. Jota Ishikawa & Barbara J. Spencer, 1996. "Rent-Shifting Export Subsidies with an Imported Intermediate Product," NBER Working Papers 5458, National Bureau of Economic Research, Inc.
  13. Crespo, Nuno & Fontoura, Maria Paula, 2007. "Determinant Factors of FDI Spillovers - What Do We Really Know?," World Development, Elsevier, vol. 35(3), pages 410-425, March.
  14. Fuest, Clemens & Huber, Bernd & Mintz, Jack, 2005. "Capital Mobility and Tax Competition," Foundations and Trends(R) in Microeconomics, now publishers, vol. 1(1), pages 1-62, December.
  15. Davies, Ronald B. & Ellis, Christopher J., 2007. "Competition in taxes and performance requirements for foreign direct investment," European Economic Review, Elsevier, vol. 51(6), pages 1423-1442, August.
  16. Michela Redoano, 2007. "Fiscal Interactions Among European Countries. Does the EU Matter?," CESifo Working Paper Series 1952, CESifo Group Munich.
  17. Johannes Becker, 2009. "Taxation of Foreign Profits with Heterogeneous Multinational Firms," CESifo Working Paper Series 2899, CESifo Group Munich.
  18. Lawless, Martina, 2009. "Tax Complexity and Inward Investment," Research Technical Papers 5/RT/09, Central Bank of Ireland.
  19. Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
  20. Djankov, Simeon & La Porta, Rafael & Shleifer, Andrei & Lopez de Silanes, Florencio, 2001. "The regulation of entry," Policy Research Working Paper Series 2661, The World Bank.
  21. Ronald B. Davies & Carsten Eckel, 2007. "Tax Competition for Heterogeneous Firms with Endogenous Entry," The Institute for International Integration Studies Discussion Paper Series iiisdp214, IIIS.
  22. Wang, Jin, 2013. "The economic impact of Special Economic Zones: Evidence from Chinese municipalities," Journal of Development Economics, Elsevier, vol. 101(C), pages 133-147.
  23. Mihir A. Desai & James R. Hines, Jr., 2001. "The Uneasy Marriage of Export Incentives and the Income Tax," NBER Chapters, in: Tax Policy and the Economy, Volume 15, pages 41-94 National Bureau of Economic Research, Inc.
  24. Gruenspecht, Howard K., 1988. "Export subsidies for differentiated products," Journal of International Economics, Elsevier, vol. 24(3-4), pages 331-344, May.
  25. Janeba, Eckhard, 1996. "Foreign direct investment under oligopoly: Profit shifting or profit capturing?," Journal of Public Economics, Elsevier, vol. 60(3), pages 423-445, June.
  26. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
  27. Bruce A. Blonigen & Ronald B. Davies & Keith Head, 2003. "Estimating the Knowledge-Capital Model of the Multinational Enterprise: Comment," American Economic Review, American Economic Association, vol. 93(3), pages 980-994, June.
  28. Reimer Jeffrey J & Stiegert Kyle, 2006. "Imperfect Competition and Strategic Trade Theory: Evidence for International Food and Agricultural Markets," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 4(1), pages 1-27, September.
  29. Desai, Mihir A. & Foley, C. Fritz & Hines, James Jr., 2004. "Foreign direct investment in a world of multiple taxes," Journal of Public Economics, Elsevier, vol. 88(12), pages 2727-2744, December.
  30. Ronald B. Davies, 2008. "Hunting High and Low for Vertical FDI," Review of International Economics, Wiley Blackwell, vol. 16(2), pages 250-267, 05.
  31. Katrak, Homi, 1977. "Multi-national Monopolies and Commercial Policy," Oxford Economic Papers, Oxford University Press, vol. 29(2), pages 283-91, July.
  32. McCallum, Jamie K, 2011. "Export processing zones : comparative data from China, Honduras, Nicaragua, and South Africa," ILO Working Papers 462479, International Labour Organization.
  33. James A. Brander & Barbara J. Spencer, 1980. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Working Papers 414, Queen's University, Department of Economics.
  34. Girma, Sourafel & Görg, Holger & Pisu, Mauro, 2007. "Exporting, Linkages and Productivity Spillovers from Foreign Direct Investment," CEPR Discussion Papers 6383, C.E.P.R. Discussion Papers.
  35. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  36. Olivier Cadot & Antoni Estevadeordal & Akiko Suwa-Eisenmann, 2004. "Rules of origin as export subsidies," Research Unit Working Papers 0405, Laboratoire d'Economie Appliquee, INRA.
  37. Markusen, James R., 1984. "Multinationals, multi-plant economies, and the gains from trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 205-226, May.
  38. Ronald B. Davies, 2004. "Tax Treaties and Foreign Direct Investment: Potential versus Performance," International Tax and Public Finance, Springer, vol. 11(6), pages 775-802, November.
  39. Svedberg, Peter, 1979. "Optimal Tariff Policy on Imports from Multinationals," The Economic Record, The Economic Society of Australia, vol. 55(148), pages 64-67, March.
  40. Mintz, Jack M. & Tsiopoulos, Thomas, 1994. "The effectiveness of corporate tax incentives for foreign investment in the presence of tax crediting," Journal of Public Economics, Elsevier, vol. 55(2), pages 233-255, October.
  41. Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May.
  42. Hines, James Jr., 1994. "Credit and deferral as international investment incentives," Journal of Public Economics, Elsevier, vol. 55(2), pages 323-347, October.
  43. Noiset, Luc, 2003. "Is it tax competition or tax exporting?," Journal of Urban Economics, Elsevier, vol. 54(3), pages 639-647, November.
  44. Thomas A. Gresik, 2001. "The Taxing Task of Taxing Transnationals," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 800-838, September.
  45. Zodrow, George R, 2003. "Tax Competition and Tax Coordination in the European Union," International Tax and Public Finance, Springer, vol. 10(6), pages 651-71, November.
  46. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  47. Johannes Becker, 2010. "Strategic Trade Policy through the Tax System," CESifo Working Paper Series 3066, CESifo Group Munich.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ucn:wpaper:201018. 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: (Nicolas Clifton)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.