Government policy towards multi-national corporations

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Government policy towards multi-national corporations

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Title: Government policy towards multi-national corporations
Author: Kaplan, Todd R.
Luski, Israel
Wettstein, David
Citation: Economics Bulletin, May 2003 6 (3): 1-8
Publisher: Vanderbilt University
Journal: Economics Bulletin
Date Issued: 2003-05-20
Abstract: We analyze an environment with asymmetric information where a country tries to attract a multi-national corporation. The country can use both taxes and grants to meet its objective of maximizing net revenues. We show that when the country has private information it can often convey it via its choice of a tax-grant pair. When the tax rates are unbounded the country is able to extract the full surplus. The existence of an upper bound can in some cases reduce the payoff to a stronger country.
Type: Article
Keywords: Foreign Direct InvestmentMulti-National CorporationsSignallingTax Holidays

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