The present paper analyses policy competition for foreign direct investment between a larger and industrially more developed country and a smaller and industrially less developed country. We demonstrate how policy competition affects the location decision of the foreign investor and derive welfare implications. The key variables in our analysis are intra-regional trade costs, differences in market size, and minimum wages. JEL: F12, F23, L13, O33
REF analyse FDI competition between asymmetric countries, differing both in market size and structure.
Policy competition for foreign direct investment between asymmetric countries
European Economic Review
Economics