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Competition in Taxes and IPR

Author

Listed:
  • Ronald B. Davies
  • Yutao Han
  • Kate Hynes
  • Yong Wang

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.

Suggested Citation

  • Ronald B. Davies & Yutao Han & Kate Hynes & Yong Wang, 2020. "Competition in Taxes and IPR," Working Papers 202019, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:202019
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    File URL: http://hdl.handle.net/10197/11443
    File Function: First version, 2020
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    References listed on IDEAS

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    More about this item

    Keywords

    Tax competition; FDI; IPRs; Imitation;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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