Subsidy Competition and the Mode of FDI: Acquisition vs Greenfield

Facundo Albornoz, Gregory Corcos and Toby Kendall

No 05-15, Discussion Papers from Department of Economics, University of Birmingham

Abstract: We model subsidy competition for a foreign MNC’s investment in two potential PTA partners. Taking into account acquisitions as an alternative investment mode weakens the case for subsidising greenfield investment. Competition between countries results in welfare losses, even more so if spillovers from the MNC’s presence exist. Hence in many cases a ban on subsidies may increase welfare. In addition, we show how trade integration affects the prospects for social waste.

Keywords: Subsidy Competition; FDI; Greenfield Investment; Mergers and Acquisitions; Regional Integration; Spillovers (search for similar items in EconPapers)
JEL-codes: F15 F21 F23 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2007-08
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (1)

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