Tax competition for foreign direct investments and the nature of the incumbent firm

Amerighi, Oscar and De Feo, Giuseppe (2017) Tax competition for foreign direct investments and the nature of the incumbent firm. Journal of Public Economic Theory. ISSN 1467-9779 (In Press)

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Abstract

We investigate tax/subsidy competition for FDI between countries of different size when a domestic firm is the incumbent in the largest market and we study how the nature (public or private) of the incumbent firm affects policy competition. We show that, differently from the case of a private firm, the country hosting the incumbent always benefits from FDI if the domestic firm is a public welfare-maximizing firm. We also show that the public firm acts as a disciplinary device for the foreign multinational that will always choose the efficient welfare-maximizing location. An efficiency-enhancing role of policy competition may then arise just when the domestic incumbent is a private firm, while tax competition is always wasteful in the presence of a public firm.

  • Item type:Article
    ID code:59601
    Dates:
    Date
    Event
    24 January 2017
    Published
    24 January 2017
    Accepted
    Notes:This is the peer reviewed version of the following article: Amerighi, O., & De Feo, G. (2017). Tax competition for foreign direct investments and the nature of the incumbent firm. Journal of Public Economic Theory, which has been published in final form at [Link to final article using the DOI]. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
    Subjects:Social Sciences > Economic Theory
    Department:Strathclyde Business School > Economics
    Depositing user: Pure Administrator
    Date deposited:26 Jan 2017 09:22
    Last modified:08 Apr 2024 23:20
    Related URLs:
    URI:https://strathprints.strath.ac.uk/id/eprint/59601
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