Unionisation triggers tax incentives to attract foreign direct investment

Andreas Haufler and Ferdinand Mittermaier

No 52, Working Papers from Bavarian Graduate Program in Economics (BGPE)

Abstract: This paper analyses tax competition between a unionised and a non-unionised country for the location of an outside firm. We show that unionisation offers an extra incentive for the government to attract a foreign competitor to a concen- trated domestic market, in order to affect the behaviour of the domestic union. This results in the unionised country's government offering a tax discount (or a subsidy premium) to the outside firm in excess of what is needed to compensate the investor for the higher union wage. In equilibrium, therefore, the unionised country can attract the outside firm even if it has other location disadvantages, such as a smaller home market.

Keywords: tax competition; trade unions; foreign direct investment (search for similar items in EconPapers)
JEL-codes: H25 H73 J58 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2008-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://bgpe.cms.rrze.uni-erlangen.de/files/2023/0 ... irect-investment.pdf First version, 2008 (application/pdf)

Related works:
Journal Article: Unionisation Triggers Tax Incentives to Attract Foreign Direct Investment (2011)
Working Paper: Unionisation Triggers Tax Incentives to Attract Foreign Direct Investment (2011)
Working Paper: Unionisation Triggers Tax Incentives to Attract Foreign Direct Investment (2008)
Working Paper: Unionisation triggers tax incentives to attract foreign direct investment (2008)
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