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On the Intensity of International Subsidy Competition for FDI

Author

Listed:
  • Tomáš HAVRà NEK

    (Charles University and Czech National Bank, Prague)

  • Zuzana IRÅ OVÃ

    (Charles University, Prague)

Abstract

The objective of this paper is to empirically assess the recently introduced models of subsidy competition based on the classical oligopoly theories. Three crucial scenarios (coordination, weak competition, and fierce competition) are tested employing iteratively re-weighted least squares, fixed effects, and dynamic Blundell-Bond estimator on the data from the World Competitiveness Yearbook. The results suggest that none of the scenarios can be strongly supported – although there is some weak support for cooperation –, and thus that empirical evidence is not in accordance with the tested models. There is no evidence for a significant international competition for FDI. It seems that, however, by means of FDI incentives, governments try to compensate foreign investors for high wages and low productivity of their countries’ labor force.

Suggested Citation

  • Tomáš HAVRà NEK & Zuzana IRÅ OVÃ, 2010. "On the Intensity of International Subsidy Competition for FDI," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 2(2(543)), pages 25-54, February.
    • Handle: RePEc:agr:journl:v:2(543):y:2010:i:2(543):p:25-54
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    References listed on IDEAS

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    Cited by:

    1. repec:cnb:ocpubv:rb10/1 is not listed on IDEAS
    2. Aneta Hintošová & Terézia Barlašová, 2021. "The Role Of Investment Promotion Policy In Attracting Foreign Direct Investment: The Case Of Slovakia," Public administration issues, Higher School of Economics, issue 5, pages 27-40.
    3. repec:cnb:ocpubv:rb09/2 is not listed on IDEAS
    4. Romualdas Ginevičius & Agnė Šimelytė, 2011. "Government incentives directed towards foreign direct investment: a case of central and eastern europe," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 12(3), pages 435-450, May.
    5. repec:cnb:ocpubv:rb11/1 is not listed on IDEAS
    6. repec:cnb:ocpubv:rb10/2 is not listed on IDEAS
    7. Magdalena Owczarczuk, 2013. "Government Incentives and FDI inflow into R&D – The Case of Visegrad Countries," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 1(2), pages 73-86.

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