Bitte verwenden Sie diesen Link, um diese Publikation zu zitieren, oder auf sie als Internetquelle zu verweisen: https://hdl.handle.net/10419/81119 
Erscheinungsjahr: 
2012
Schriftenreihe/Nr.: 
Working Papers No. 460
Verlag: 
Bielefeld University, Institute of Mathematical Economics (IMW), Bielefeld
Zusammenfassung: 
This paper analyzes the impact of foreign investments on a small country's economy in the context of international competition. To that end, we model tax and infrastructure competition within a differential game framework between two unequally sized countries. The model accounts for the widely recognized characteristic that small states are more flexible in their political decision making than larger countries. However, we also acknowledge that small size is associated with limited institutional capacity in the provision of public goods. The model shows that the long-term outcome of international competition crucially depends on the degree of capital mobility. In particular, we show that flexibility mitigates against - but does not eliminate - the likelihood of collapse in a small economy. Finally, we note that the beneficial effect of flexibility in a small state increases with its inefficiency in providing public infrastructure and with the degree of international openness.
Schlagwörter: 
Tax/Infrastructure competition
Open-loop/Markovian strategies
Differential games
JEL: 
H25
H73
O30
O43
Persistent Identifier der Erstveröffentlichung: 
Dokumentart: 
Working Paper

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