Conventional wisdom holds that lack of government commitment deters foreign investment in developing countries. Yet this explanation is not convincing because some econometric studies have found little support for the role of political risk and host governments can offer upfront subsidies that...

Host governments often display two types of behavior toward outside investors. At an initial stage they eagerly compete for production facilities by offering subsidy packages, but often reverse these policies at a later point. In contrast to the literature that explains the behavior as a result...

This paper explores the role of government policies in a situation where the wage gap between high-skilled and low-skilled workers is widening due to increasing foreign competition in the manufacturing of low-skilled intensive goods. A two-period, two-sector general equilibrium model of a small...

Economists emphasize the benefits from free trade due to international specialization, but typically have a narrow measure of what matters to individuals. Critics of free trade, by contrast, focus on the pattern of consumption in society and the nature of goods being consumed, but often fail to...

This paper reconsiders the question of whether tax competition for mobile capital leads to tax rates on capital that are too low or too high from the combined viewpoint of the competing regions (or countries in an economic union). In contrast to standard models of tax competition, both commodity...

This paper analyzes the relationship between brain drain, human capital accumulation and individual net incomes in the presence of a redistributional tax policy, credit market constraints, administrative costs of tax collection, and lack of government commitment. We characterize how decreasing...

Is global competition for mobile capital harmful (less public goods) or beneficial (less government waste)? This paper combines both aspects within a generalized version of the comparative public finance model (Persson, Roland and Tabellini, 2000) by introducing multiple countries and endogenous...