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Fiscal competition for FDI when bidding is costly

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journal contribution
posted on 07.12.2016, 14:25 by Ben Ferrett, Ian Wooton
We introduce bidding costs into a standard model of tax/subsidy competition between two potential host countries to attract the plant of a monopoly firm. Such a bidding cost, even if it is infinitesimal, qualitatively alters the resulting equilibrium. At most one country offers fiscal inducements to the firm, and this attenuates the familiar "race to the bottom" in corporate taxes. In general, the successful host country benefits from the resulting absence of active tax/subsidy competition, at the expense of the owners of the firm in the rest of the world.

History

School

  • Business and Economics

Department

  • Economics

Published in

Economics Bulletin, 2013, vol. 33, issue 3, pages 2202-2208

Volume

33

Issue

3

Pages

2202 - 2208 (7)

Citation

FERRETT, B. and WOOTON, I., 2013. Fiscal competition for FDI when bidding is costly. Economics Bulletin, 33 (3), pp.2202-2208.

Publisher

Economics Bulletin

Version

VoR (Version of Record)

Publisher statement

This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/

Publication date

2013

ISSN

1545-2921

Language

en

Exports

Loughborough Publications

Keywords

Exports