MULTINATIONALS, TAX HOLIDAYS, AND TECHNOLOGY TRANSFER*

Kaz Miyagiwa () and Yuka Ohno

The Japanese Economic Review, 2009, vol. 60, issue 1, 82-96

Abstract: Host country governments often grant investment incentives to foreign firms located in their territories. We show that such preferential treatment of foreign firms can induce transfer of foreign technology, facilitate entry by the local firm, and improve host country welfare. However, this pro‐competitive outcome results when preferential treatment is granted for a limited time. Permanent tax concessions yield the opposite effect.

Date: 2009
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