This paper agrues that the prices of intermediates may influence the pattern of foreign direct investment (FDI). In our model, two downstream firms select whether to serve each other's markets through exports of FDI, always sourcing the intermediate good or service at the location of production....

We study the impact of foreign direct investment (FDI) policies when source firms locate some production in two host countries. By reducing its tax on multinational production, a host country can attract additional FDI, some of which is diverted from other host countries. The shift in FDI causes...

We study a multinational enterprise's (MNE) choice of foreign direct investment (FDI) mode in a vertically related market with local input sourcing. We show that the vertical structure of the market and its features play a crucial role for the MNE's decision: backward linkages, enhanced upstream...

According to conventional wisdom, multinational firms undertake vertical FDI in order to take advantage of cross-border factor cost differences and source the inputs from abroad at better terms. Recent empirical findings though document that this is not always the case. We provide theoretical...

We consider the plant location decision of a multinational corporation (MNC), which has the option to invest in a more or in a less technologically lagging country, and which aims to use its foreign plant as an export-platform. We show that the plant location decision of the MNC depends on...

We study a multinational enterprise's (MNE) choice of foreign direct investment (FDI) mode in a vertically related market with local input sourcing. We show that the vertical structure of the market and its features play a crucial role for the MNE's decision: backward linkages, enhanced upstream...

This paper analyzes incentives of a multinational enterprise to manipulate an internal transfer price to take advantage of corporate-tax differences across countries under both monopoly and oligopoly. We examine "cost plus" and "comparable uncontrollable price" as two alternative implementations...

In this paper we investigate tax/subsidy competition for FDI between countries of different size when a domestic firm is the incumbent in the largest market. We investigate how the nature (public or private) of the incumbent firm affects policy competition between the two governments seeking to...

Do multinational firms wield more market power than their domestic counterparts? Using Hungarian firm-level data between 1993 and 2007, we find that markups are 19 percent higher for foreign-owned firms than for domestically owned firms. Moreover, markups for domestically owned firms are...

Despite the fact that many modern preferential trade agreements include commitments to foreign investors in imperfectly competitive services sectors, the literature has not established conditions under which these agreements are beneficial or harmful. The authors fill that void by developing a...