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Competing for Foreign Direct Investments: A Real Options Approach

Paolo Panteghini and Guttorm Schjelderup

No 929, CESifo Working Paper Series from CESifo

Abstract: This paper uses the Bad News Principle to study how the ability of multinationals to shift profits by transfer pricing affects both the timing of foreign direct investment decisions and government tax policy. A main finding of the paper is that if countries compete to attract foreign direct investments, only weak conditions are needed to establish that welfare is higher when firms can postpone irreversible investments as opposed to when they cannot.

Keywords: corporate taxation; irreversibility; MNE; real options and uncertainty (search for similar items in EconPapers)
JEL-codes: H25 (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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