Unionisation triggers tax incentives to attract foreign direct investment

Andreas Haufler and Ferdinand Mittermaier

Discussion Papers in Economics from University of Munich, Department of Economics

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 concentrated 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)
Date: 2008-05
New Economics Papers: this item is included in nep-pbe
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Citations: View citations in EconPapers (4)

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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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