Competition for FDI with vintage investment and agglomeration advantages

• 成果类型: Article
• 署名作者: Konrad, Kai A.; Kovenock, Dan
• 署名单位: Max Planck Society; University of Iowa
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2009.08.004
• 发表日期: 2009
• 页码: 230-237
• 关键词: Dynamic tax competition; vintage capital; agglomeration; Foreign direct investment; Bidding for firms

摘要

Countries compete for new FDI investment, whereas stocks of FDI generate agglomeration benefits and are potentially Subject to extortionary taxation. We study the interaction between these aspects in a simple vintage capital framework with discrete time and an infinite horizon, focussing on Markov perfect equilibrium. We show that the equilibrium taxation destabilizes agglomeration advantages. The agglomeration advantage is valuable, but is exploited in the short run. The tax revenue in the equilibrium is substantial, and higher on old FDI than on new FDI, even though countries are not allowed to use discriminatory taxation. If countries can provide fiscal incentives for attracting new firms, this stabilizes existing agglomeration advantages, but may erode the fiscal revenue in the equilibrium. (C) 2009 Elsevier B.V. All rights reserved.