Subsidy competition and the mode of FDI

Facundo Albornoz (), Gregory Corcos and Toby Kendall

Regional Science and Urban Economics, 2009, vol. 39, issue 4, pages 489-501

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.

Keywords: Subsidy; competition; FDI; Greenfield; investment; Mergers; and; acquisitions; Regional; integration; Positive; externalities (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:regeco:v:39:y:2009:i:4:p:489-501

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