potentially problematic, as they depend on a number of restrictive assumptions, namely that (i) multinationals use domestically … produced inputs in the same proportion as imported inputs, (ii) multinationals have the same input sourcing behaviour as … domestic firms, irrespective of their country of origin, and (iii) the demand for locally produced inputs by multinationals is …

We examine the economic justification for providing investment subsidies to foreign-owned multinationals. These provide … returns to scale. Offering subsidies to multinationals may be in the national interest if the investment raises the net value …, countries may compete to attract investment. This subsidy competition transfers much of the rents to the multinationals. …