International competition for multinational investment
Working paper
Permanent lenke
http://hdl.handle.net/11250/163014Utgivelsesdato
1998-08Metadata
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- Discussion papers (SAM) [662]
Sammendrag
We examine the economic justification for providing investment subsidies to foreign-owned
multinationals. These provide employment opportunities and generate demand for domestic
intermediate inputs, produced by domestic workers with increasing returns to scale. Offering
subsidies to multinationals may be in the national interest if the investment raises the net
value of domestic production. When agglomerative forces are sufficiently strong, a subsidy
that attracts the first foreign firm may induce several to enter, establishing a thriving modern
sector. With a limited number of foreign enterprises, countries may compete to attract investment. This subsidy competition transfers much of the rents to the multinationals.
Utgiver
Norwegian School of Economics and Business Administration. Department of EconomicsSerie
Discussion paper1998:14