FISCAL COMPETITION IN DEVELOPING COUNTRIES: A SURVEY OF THE THEORETICAL AND EMPIRICAL LITERATURE

Thierry Madiès () and Jean-Jacques Dethier
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Thierry Madiès: University of Fribourg, Switzerland

Journal of International Commerce, Economics and Policy (JICEP), 2012, vol. 03, issue 02, 1-31

Abstract: Fiscal competition between governments to attract investment can take the form of business tax rebates, productivity-enhancing public infrastructure, tax holidays, accelerated depreciation allowances or loss carry-forward for income tax purposes. This paper surveys the recent theoretical and empirical economic literature and deals with three issues. First, it examines if the theoretical literature on fiscal competition and bidding races contribute to a better understanding of these phenomena in developing countries. Second, it examines whether FDI inflows in developing countries are sensitive to fiscal incentives and if there is empirical evidence of strategic behavior by developing country governments in order to attract FDI. Finally, it reviews the literature's conclusions about fiscal competition among local governments in developing countries.

Keywords: Fiscal competition; fiscal incentives; decentralization; developing countries; JEL Classifications: H2; JEL Classifications: H5; JEL Classifications: H7; JEL Classifications: H25; JEL Classifications: H54 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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Working Paper: Fiscal competition in developing countries: a survey of the theoretical and empirical literature (2010)
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DOI: 10.1142/S1793993312500135

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