Welfare, taxes and foreign investment

Reis, Ana Balcão

doi:10.1016/j.jedc.2005.05.002

Cited by 7 publications

(13 citation statements)

References 19 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Judd (2002) finds that, in the presence of imperfect competition, the ideal tax may even be negative, thus may be a subsidy. As in Reis (2006) our results also suggest a negative tax rate, since the tax credit is higher than the tax rate itself. However, taxation is particularly important in endogenous growth models where externalities can be internalized by distortionary taxation, inducing an efficient allocation (Turnovsky, 1996).…”

Section: Introductionsupporting

confidence: 74%

“…The R&D-based model follows Grossman and Helpman (1991, Chapter 3), Reis (2006) and de Mello-Sampayo, de Sousa-Vale and Camoes (2008) but we go one step further comparing optimal with non-optimal R&D policies to accelerate the growth rate. The Government can attribute a subsidy to research in a closed economy or deduct taxes to profits in an open economy or attribute a subsidy to national R&D firms that would be needed to undertake an optimal policy of incentives (tax cuts) to foreign investors.…”

Section: The Modelmentioning

confidence: 99%

See 1 more Smart Citation

Protectionism under R&D policy: innovation rate and welfare

Mello-Sampayo

Vale

Camões

et al. 2012

Journal of Economic Studies

View full text Add to dashboard Cite

The pressure from national lobbies may lead governments to shift from an optimal into a non-optimal innovation policy. This paper examines the growth and welfare effects of optimal and non-optimal innovation policies. The non-optimal policy corresponds to a subsidy for national innovators that is equivalent to an optimal policy of incentives (tax cuts) to foreign investors. Since we are assessing what can nationals do with the support that could be oriented to foreign firms, we are measuring what the economy loses for not supporting foreign firms. We find welfare loss when supporting national R&D instead of foreign R&D. We conclude that the same support given to innovation can produce strikingly different outcomes depending on who receives the support.JEL Classification: F21; H21; O40.

show abstract

Section: Introductionsupporting

confidence: 74%

Section: The Modelmentioning

confidence: 99%

Protectionism under R&D policy: innovation rate and welfare

Mello-Sampayo

Vale

Camões

et al. 2012

Journal of Economic Studies

View full text Add to dashboard Cite

show abstract

“…4 Other than these two papers, I do especially analyze the role of FDI as a hinderance for development. Therefore, this paper is related to the works of Grossman (1984) and Reis (2001), who comment on how FDI might slow down domestic entrepreneurial activity. Both results complement the argument made here, but stress dierent mechanisms.…”

Section: Fdi Financial Capitalmentioning

confidence: 99%

Throwing the Spanner in the Works: The Mixed Blessing of FDI

Schwab

2014

SSRN Journal

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract FDI is generally attributed to have positive impact for developing countries. In contrast, this paper shows that foreign capital inows may cause an economy to be stuck in a middle-income trap. Introducing a simple capital market imperfection into a standard neoclassical (open-economy) model of growth, I show that FDI crowds out domestic investment when countries are still growing. If protable investments are pursued by foreign capital owners, this does reduce chances for domestic entrepreneurs that they would have otherwise been able to take, by means of economy-wide savings. The long term losses due to the crowding-out eect occur despite the the short-term gains that sudden capital inows entail, as in static models. At the same time, savings that are not invested leave the country in turn, generating reverse capital ows. Terms of use: Documents in EconStor may

show abstract

“…In her work, Reis (2001) established that given the knowledge spill-overs and creative destruction, an increase in growth, even in a closed economy, as a consequence of foreigncapital inflow, may cause a decline in welfare through immiserizing growth.…”

Section: Introductionmentioning

confidence: 99%

Foreign capital inflow and its welfare implications in a developing country context

Mukherjee¹

2017

Economics

View full text Add to dashboard Cite

In a small open developing country context, the author considers a three-sector general equilibrium framework and tries to find out the effects of foreign capital inflow on welfare of the country. Comparative-static results show that foreign capital inflow widens the skilledunskilled wage gap under some reasonable conditions, although it causes an expansion of the foreign enclave and the agricultural sector and contraction of the domestic manufacturing sector. Taking sector specific foreign capital, the authors find that foreign direct investment is beneficial in a free market small open economy in the absence of tariff. Economics: The Open-Access, Open-Assessment E-Journal 11 (2017-17) www.economics-ejournal.org 1 IntroductionThe impact of foreign-capital inflow on the welfare of a developing economy has always been a subject of immense interest among the policymakers and the academicians. The famous Brecher-Alejandro's (1977) proposition, based on the theoretical works by Bhagwati (1958), Johnson (1967), andBhagwati (1973), is a benchmark in this context. The work of BrecherAlejandro (1977) has successfully analysed the effects of foreign-capital inflow on the welfare of an economy. In a two-commodity, two-factor framework, characterized by the presence of full employment, they have shown that, if the relatively capital-intensive sector is protected by tariff and, the income from foreign capital is fully repatriated, then, an increase in foreigncapital inflow would cause a loss in welfare of a country. However, the inflow of foreign capital cannot influence the welfare of a country if the import-competing sector is not protected. This is the famous Brecher-Alejandro's (1977) proposition of the trade theory. The work of Khan (1982) has also thrown light on this in a Harris-Todaro's (1970) framework of urbanunemployment. The result of Khan's work also supports the Brecher-Alejandro's (1977) proposition.Beladi and Marjit (1992a) have re-examined the Brecher-Alejandro's (1977) proposition in a full-employment model proposed by Heckscher-Ohlin-Samuelson, in the presence of an export-processing-zone (EPZ) that uses the sector-specific foreign capital. According to their work, the inflow of foreign capital obstructs the national welfare if the country imports capitalintensive goods while the import-competing sector is protected. Contrarily, if the country imports labour intensive commodity, the expansion of the EPZ will make the country better off.In an another work, Beladi and Marjit (1992b) have considered a three-sector model in which one sector is EPZ that uses sector-specific foreign capital in a subsystem proposed by Heckscher-Ohlin-Samuelson. In this model, skilled labour force is fully employed and the market of unskilled labour is characterized by the presence of unemployment. This work invents the conditions under which one can find out the negative effect of foreign-capital inflow on welfare of a country. It happens when the foreign capital is not injected directly into the importcompeting sect...

show abstract

Welfare, taxes and foreign investment

Cited by 7 publications

References 19 publications

Protectionism under R&D policy: innovation rate and welfare

Protectionism under R&D policy: innovation rate and welfare

Throwing the Spanner in the Works: The Mixed Blessing of FDI

Foreign capital inflow and its welfare implications in a developing country context

Contact Info

Product

Resources

About