Submission_paper_WE_V12-05-2019.pdf (550.51 kB)
Fiscal competition for foreign direct investment with knowledge spillovers and trade costs
We develop a model of fiscal competition for foreign direct investment,
and show that the decision of multinational firms to locate in the proximity
of indigenous firms – which can be thought of as agglomeration – may be
the result of the provision of government incentives that aim to capitalise
on the potential for knowledge spillovers to indigenous industry. Somewhat
different but complementary to existing literature, we also show that fiscal
competition may increase the welfare of both winning and losing countries
in the auction for the multinational firm when it leads to the relocation of
multinationals away from countries that do not have the potential to benefit
from knowledge spillovers to countries that do. As trade costs fall and the
potential for knowledge spillovers increases, both outcomes become more
likely in equilibrium.
History
School
- Business and Economics
Department
- Economics
Published in
The World EconomyVolume
44Issue
10Pages
2820-2836Publisher
WileyVersion
- AM (Accepted Manuscript)
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© WileyPublisher statement
This is the peer reviewed version of the following article: FERRETT, B. and GRAVINO, D., 2021. Fiscal competition for foreign direct investment with knowledge spillovers and trade costs. The World Economy, 44(10), pp. 2820-2836, doi:10.1111/twec.13073, which has been published in final form at https://doi.org/10.1111/twec.13073. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.Acceptance date
2020-12-07Publication date
2021-01-09Copyright date
2021ISSN
0378-5920eISSN
1467-9701Publisher version
Language
- en
Depositor
Dr Ben Ferrett Deposit date: 9 January 2020Usage metrics
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