Template-Type: ReDIF-Paper 1.0

Author-Name: Andreas Haufler
Author-X-Name-First: Andreas
Author-X-Name-Last: Haufler

Author-Name: Ferdinand Mittermaier
Author-X-Name-First: Ferdinand
Author-X-Name-Last: Mittermaier

Title: 	Unionisation triggers tax incentives to attract foreign direct investment
	
Abstract: This paper analyses tax competition between a unionised and a non-unionised
country for the location of an outside firm. We show that unionisation offers an
extra incentive for the government to attract a foreign competitor to a concen-
trated domestic market, in order to affect the behaviour of the domestic union.
This results in the unionised country's government offering a tax discount (or a
subsidy premium) to the outside firm in excess of what is needed to compensate
the investor for the higher union wage. In equilibrium, therefore, the unionised
country can attract the outside firm even if it has other location disadvantages,
such as a smaller home market.
Length:  35 pages
Creation-Date:  2008-05
File-URL: http://www.bgpe.de/texte/DP/052_haufler_mittermaier.pdf
File-Format: Application/pdf
File-Function: First version, 2008
Number: 052
Classification-JEL: H25, H73, J58
Keywords: tax competition, trade unions, foreign direct investment
Handle: RePEc:bav:wpaper:052_haufler_mittermaier