Competition in Taxes and IPR

Ronald Davies, Yutao Han, Kate Hynes and Yong Wang

No 202019, Working Papers from School of Economics, University College Dublin

Abstract: We examine competition for foreign direct investment when governments compete in tax incentives along with intellectual property rights (IRPs) protection. Higher IPRs result in a lower probability of the multinational enterprise (MNE) being imitated and thus higher expected profits and tax revenues, all else equal. We show that, from the perspective of competing hosts, equilibrium IPRs are too high while taxes are too low. Coordination between jurisdictions can therefore lower the multinational's expected payoff, providing a rationale for why during recent trade negotiations FDI home countries complain about low IPRs in some locations while not pushing for them to be centrally determined.

Keywords: Tax competition; FDI; IPRs; Imitation (search for similar items in EconPapers)
JEL-codes: F23 H25 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2020-06
New Economics Papers: this item is included in nep-acc, nep-int, nep-mic and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:202019

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