Subsidy competition and the mode of FDI

Facundo Albornoz-Crespo; Geogory Corcos; Toby Kendall

doi:10.1016/j.regsciurbeco.2009.02.002

Subsidy competition and the mode of FDI

Facundo Albornoz-Crespo, Geogory Corcos, Toby Kendall

Economics

Research output: Contribution to journal › Article › peer-review

7 Citations (Scopus)

Abstract

We model subsidy competition for a foreign MNC's investment in two trading partners. Taking into account acquisitions as an alternative investment mode weakens the case for subsidising greenfield investment. Competition between countries results in welfare losses. which are reinforced by positive externalities from the MNC's presence and regional integration. The results also apply to situations where the acquisition price accounts for the possibility of subsidies and when governments use acquisition subsidies as an alternative to greenfield subsidies. (C) 2009 Elsevier B.V. All rights reserved.

Original language	English
Pages (from-to)	489-501
Number of pages	13
Journal	Regional Science and Urban Economics
Volume	39
Issue number	4
DOIs	https://doi.org/10.1016/j.regsciurbeco.2009.02.002
Publication status	Published - 1 Jul 2009

Keywords

Regional integration
FDI
Mergers and acquisitions
Positive externalities
Subsidy competition
Greenfield investment

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10.1016/j.regsciurbeco.2009.02.002

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abstract = "We model subsidy competition for a foreign MNC's investment in two trading partners. Taking into account acquisitions as an alternative investment mode weakens the case for subsidising greenfield investment. Competition between countries results in welfare losses. which are reinforced by positive externalities from the MNC's presence and regional integration. The results also apply to situations where the acquisition price accounts for the possibility of subsidies and when governments use acquisition subsidies as an alternative to greenfield subsidies. (C) 2009 Elsevier B.V. All rights reserved.",

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AB - We model subsidy competition for a foreign MNC's investment in two trading partners. Taking into account acquisitions as an alternative investment mode weakens the case for subsidising greenfield investment. Competition between countries results in welfare losses. which are reinforced by positive externalities from the MNC's presence and regional integration. The results also apply to situations where the acquisition price accounts for the possibility of subsidies and when governments use acquisition subsidies as an alternative to greenfield subsidies. (C) 2009 Elsevier B.V. All rights reserved.

KW - Regional integration

KW - FDI

KW - Mergers and acquisitions

KW - Positive externalities

KW - Subsidy competition

KW - Greenfield investment

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DO - 10.1016/j.regsciurbeco.2009.02.002

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JO - Regional Science and Urban Economics

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Subsidy competition and the mode of FDI

Abstract

Keywords

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