Fiscal Competition in Developing Countries : A Survey of the Theoretical and Empirical Literature

The last two decades have witnessed a sharp increase in foreign direct investment (FDI) flows and increased competition among developing countries to attract FDI, resulting in higher investment incentives offered by host governments and removal of...

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Main Authors: Madies, Thierry, Dethier, Jean-Jacques
Format: Policy Research Working Paper
Language:English
Published: 2012
Subjects:
BID
TAX
Online Access:http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100517095203
http://hdl.handle.net/10986/3796
id okr-10986-3796
recordtype oai_dc
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic ADDED TAX
AGENCY PROBLEM
ASYMMETRIC INFORMATION
AUCTION
AUCTIONS
BAILOUT
BID
BIDS
BOND
BUDGET CONSTRAINT
BUDGET CONSTRAINTS
BUSINESS OPPORTUNITIES
BUSINESS TAX
BUSINESS TAXES
CAPITAL FLIGHT
CAPITAL FLOWS
CAPITAL FORMATION
CAPITAL IMPORTER
CENTRAL BANK
CENTRAL GOVERNMENT
CENTRAL GOVERNMENTS
CITIES
COASTAL PROVINCES
COMMITMENT DEVICE
COMMON MARKET
COMPETITIVE MARKETS
CORPORATE INCOME TAX
CORPORATE TAX
CORPORATE TAX RATE
CORPORATE TAX RATES
CORPORATE TAXES
COST OF CAPITAL
COUNTRY MARKET
COUNTRY RISK
CURRENT EXPENDITURES
DECENTRALIZATION
DEMOCRACY
DEVELOPING COUNTRIES
DEVELOPING COUNTRY
DEVELOPING ECONOMIES
DIFFERENTIALS
DIRECT PAYMENTS
DISTRICTS
DOMESTIC PRICES
DOUBLE TAXATION
ECONOMIC ANALYSIS
ECONOMIC DEVELOPMENT
ECONOMIC GROWTH
ECONOMIC INTEGRATION
EFFECTIVE TAX RATES
ENTERPRISE OPERATIONS
EQUALIZATION
EQUIPMENTS
EQUITY INVESTMENT
EXCESS SUPPLY
EXPENDITURE
EXPENDITURE NEEDS
EXPENDITURES ON INFRASTRUCTURE
EXPORTER
EXTERNALITIES
FEDERAL SUBSIDIES
FEDERAL TRANSFER
FINANCIAL CRISIS
FINANCIAL MARKETS
FINANCIAL STUDIES
FISCAL AUTONOMY
FISCAL DECENTRALIZATION
FISCAL FEDERALISM
FISCAL POLICY
FISCAL TRANSFERS
FIXED CAPITAL
FIXED INVESTMENT
FOREIGN DIRECT INVESTMENT
FOREIGN FIRMS
FOREIGN INVESTMENT
FOREIGN INVESTORS
FOREIGN MARKET
FOREIGN TAX CREDITS
FREE TRADE
FREE TRADE AGREEMENT
GLOBALIZATION
GOVERNMENT BORROWING
GOVERNMENT POLICIES
GOVERNMENT REVENUE
HARD BUDGET CONSTRAINTS
HARMONIZATION
HOME COUNTRY
HOST COUNTRIES
HOST COUNTRY
HOST GOVERNMENTS
HUMAN CAPITAL
IMPLICIT TAX
INCOME TAX
INDUSTRIAL COUNTRIES
INFORMATION ASYMMETRIES
INFRASTRUCTURE DEVELOPMENT
INFRASTRUCTURE INVESTMENT
INSURANCE
INSURANCE COMPANIES
INTANGIBLE
INTANGIBLE ASSETS
INTERNATIONAL BANK
INTERNATIONAL CAPITAL
INTERNATIONAL CAPITAL MOBILITY
INTERNATIONAL INVESTORS
INTERNATIONAL TRADE
INVESTING
INVESTMENT BANK
INVESTMENT CLIMATE
INVESTMENT DECISION
INVESTMENT DECISIONS
INVESTMENT PROJECTS
JURISDICTION
JURISDICTIONS
LEVEL OF GOVERNMENT
LOCAL AUTONOMY
LOCAL BUSINESS
LOCAL GOVERNMENT
LOCAL GOVERNMENTS
LOCAL PUBLIC GOOD
MARGINAL COST
MARKET CONDITION
MARKET SIZE
MAYOR
MUNICIPALITIES
MUNICIPALITY
NATURAL RESOURCE
NET CAPITAL
OPPORTUNISTIC BEHAVIOR
OPPORTUNITY COST
OUTPUT
PERSONAL INCOME
POLICY CHOICES
POLICY DECISIONS
POLITICAL ACCOUNTABILITY
POLITICAL STABILITY
PORTFOLIO
POSITIVE EXTERNALITIES
POTENTIAL INVESTORS
PRIVATE CAPITAL
PRIVATE LOANS
PRIVATE SECTOR
PROPERTY TAX
PROVINCE
PROVINCES
PROVINCIAL GOVERNMENT
PROVINCIAL GOVERNMENTS
PROVINCIAL LEVEL
PROVINCIAL TAX
PROVINCIAL TAXES
PROVISIONS
PUBLIC
PUBLIC CONSUMPTION
PUBLIC ECONOMICS
PUBLIC EXPENDITURE
PUBLIC EXPENDITURES
PUBLIC FINANCE
PUBLIC FUNDS
PUBLIC GOODS
PUBLIC INFORMATION
PUBLIC INFRASTRUCTURE
PUBLIC INVESTMENT
PUBLIC LOANS
PUBLIC POLICY
PUBLIC SECTOR
PUBLIC SPENDING
REGIONAL INTEGRATION
REGIONAL TRADE
RESOURCE ALLOCATION
RETURN
RETURNS
REVENUE SHARING
SMALL COUNTRIES
SOCIAL VALUE
SOFT BUDGET CONSTRAINT
SOFT BUDGET CONSTRAINTS
SUB-NATIONAL
SUB-NATIONAL GOVERNMENT
SUBNATIONAL
SUBNATIONAL GOVERNMENT
SUBNATIONAL GOVERNMENTS
TAX
TAX AUTONOMY
TAX BASE
TAX BASES
TAX BREAKS
TAX BURDEN
TAX CHANGES
TAX COMPETITION
TAX CONCESSIONS
TAX COORDINATION
TAX CREDIT
TAX CREDITS
TAX DIFFERENTIALS
TAX INCENTIVES
TAX PAYMENTS
TAX PLANNING
TAX POLICIES
TAX POLICY
TAX PREFERENCES
TAX PROVISION
TAX PURPOSES
TAX RATE
TAX RATES
TAX REBATES
TAX REDUCTION
TAX REGIME
TAX REGIMES
TAX REVENUE
TAX REVENUE SHARING
TAX REVENUES
TAX SPARING
TAX TREATMENT
TAX TREATY
TAXATION
TOTAL GOVERNMENT EXPENDITURE
TRANSACTION
TRANSACTION COSTS
TRANSITION COUNTRIES
TREATIES
TREATY
URBAN ECONOMICS
USE TAX
UTILITIES
VALUATION
WORLD TRADE
spellingShingle ADDED TAX
AGENCY PROBLEM
ASYMMETRIC INFORMATION
AUCTION
AUCTIONS
BAILOUT
BID
BIDS
BOND
BUDGET CONSTRAINT
BUDGET CONSTRAINTS
BUSINESS OPPORTUNITIES
BUSINESS TAX
BUSINESS TAXES
CAPITAL FLIGHT
CAPITAL FLOWS
CAPITAL FORMATION
CAPITAL IMPORTER
CENTRAL BANK
CENTRAL GOVERNMENT
CENTRAL GOVERNMENTS
CITIES
COASTAL PROVINCES
COMMITMENT DEVICE
COMMON MARKET
COMPETITIVE MARKETS
CORPORATE INCOME TAX
CORPORATE TAX
CORPORATE TAX RATE
CORPORATE TAX RATES
CORPORATE TAXES
COST OF CAPITAL
COUNTRY MARKET
COUNTRY RISK
CURRENT EXPENDITURES
DECENTRALIZATION
DEMOCRACY
DEVELOPING COUNTRIES
DEVELOPING COUNTRY
DEVELOPING ECONOMIES
DIFFERENTIALS
DIRECT PAYMENTS
DISTRICTS
DOMESTIC PRICES
DOUBLE TAXATION
ECONOMIC ANALYSIS
ECONOMIC DEVELOPMENT
ECONOMIC GROWTH
ECONOMIC INTEGRATION
EFFECTIVE TAX RATES
ENTERPRISE OPERATIONS
EQUALIZATION
EQUIPMENTS
EQUITY INVESTMENT
EXCESS SUPPLY
EXPENDITURE
EXPENDITURE NEEDS
EXPENDITURES ON INFRASTRUCTURE
EXPORTER
EXTERNALITIES
FEDERAL SUBSIDIES
FEDERAL TRANSFER
FINANCIAL CRISIS
FINANCIAL MARKETS
FINANCIAL STUDIES
FISCAL AUTONOMY
FISCAL DECENTRALIZATION
FISCAL FEDERALISM
FISCAL POLICY
FISCAL TRANSFERS
FIXED CAPITAL
FIXED INVESTMENT
FOREIGN DIRECT INVESTMENT
FOREIGN FIRMS
FOREIGN INVESTMENT
FOREIGN INVESTORS
FOREIGN MARKET
FOREIGN TAX CREDITS
FREE TRADE
FREE TRADE AGREEMENT
GLOBALIZATION
GOVERNMENT BORROWING
GOVERNMENT POLICIES
GOVERNMENT REVENUE
HARD BUDGET CONSTRAINTS
HARMONIZATION
HOME COUNTRY
HOST COUNTRIES
HOST COUNTRY
HOST GOVERNMENTS
HUMAN CAPITAL
IMPLICIT TAX
INCOME TAX
INDUSTRIAL COUNTRIES
INFORMATION ASYMMETRIES
INFRASTRUCTURE DEVELOPMENT
INFRASTRUCTURE INVESTMENT
INSURANCE
INSURANCE COMPANIES
INTANGIBLE
INTANGIBLE ASSETS
INTERNATIONAL BANK
INTERNATIONAL CAPITAL
INTERNATIONAL CAPITAL MOBILITY
INTERNATIONAL INVESTORS
INTERNATIONAL TRADE
INVESTING
INVESTMENT BANK
INVESTMENT CLIMATE
INVESTMENT DECISION
INVESTMENT DECISIONS
INVESTMENT PROJECTS
JURISDICTION
JURISDICTIONS
LEVEL OF GOVERNMENT
LOCAL AUTONOMY
LOCAL BUSINESS
LOCAL GOVERNMENT
LOCAL GOVERNMENTS
LOCAL PUBLIC GOOD
MARGINAL COST
MARKET CONDITION
MARKET SIZE
MAYOR
MUNICIPALITIES
MUNICIPALITY
NATURAL RESOURCE
NET CAPITAL
OPPORTUNISTIC BEHAVIOR
OPPORTUNITY COST
OUTPUT
PERSONAL INCOME
POLICY CHOICES
POLICY DECISIONS
POLITICAL ACCOUNTABILITY
POLITICAL STABILITY
PORTFOLIO
POSITIVE EXTERNALITIES
POTENTIAL INVESTORS
PRIVATE CAPITAL
PRIVATE LOANS
PRIVATE SECTOR
PROPERTY TAX
PROVINCE
PROVINCES
PROVINCIAL GOVERNMENT
PROVINCIAL GOVERNMENTS
PROVINCIAL LEVEL
PROVINCIAL TAX
PROVINCIAL TAXES
PROVISIONS
PUBLIC
PUBLIC CONSUMPTION
PUBLIC ECONOMICS
PUBLIC EXPENDITURE
PUBLIC EXPENDITURES
PUBLIC FINANCE
PUBLIC FUNDS
PUBLIC GOODS
PUBLIC INFORMATION
PUBLIC INFRASTRUCTURE
PUBLIC INVESTMENT
PUBLIC LOANS
PUBLIC POLICY
PUBLIC SECTOR
PUBLIC SPENDING
REGIONAL INTEGRATION
REGIONAL TRADE
RESOURCE ALLOCATION
RETURN
RETURNS
REVENUE SHARING
SMALL COUNTRIES
SOCIAL VALUE
SOFT BUDGET CONSTRAINT
SOFT BUDGET CONSTRAINTS
SUB-NATIONAL
SUB-NATIONAL GOVERNMENT
SUBNATIONAL
SUBNATIONAL GOVERNMENT
SUBNATIONAL GOVERNMENTS
TAX
TAX AUTONOMY
TAX BASE
TAX BASES
TAX BREAKS
TAX BURDEN
TAX CHANGES
TAX COMPETITION
TAX CONCESSIONS
TAX COORDINATION
TAX CREDIT
TAX CREDITS
TAX DIFFERENTIALS
TAX INCENTIVES
TAX PAYMENTS
TAX PLANNING
TAX POLICIES
TAX POLICY
TAX PREFERENCES
TAX PROVISION
TAX PURPOSES
TAX RATE
TAX RATES
TAX REBATES
TAX REDUCTION
TAX REGIME
TAX REGIMES
TAX REVENUE
TAX REVENUE SHARING
TAX REVENUES
TAX SPARING
TAX TREATMENT
TAX TREATY
TAXATION
TOTAL GOVERNMENT EXPENDITURE
TRANSACTION
TRANSACTION COSTS
TRANSITION COUNTRIES
TREATIES
TREATY
URBAN ECONOMICS
USE TAX
UTILITIES
VALUATION
WORLD TRADE
Madies, Thierry
Dethier, Jean-Jacques
Fiscal Competition in Developing Countries : A Survey of the Theoretical and Empirical Literature
geographic_facet The World Region
The World Region
relation Policy Research working paper ; no. WPS 5311
description The last two decades have witnessed a sharp increase in foreign direct investment (FDI) flows and increased competition among developing countries to attract FDI, resulting in higher investment incentives offered by host governments and removal of restrictions on operations of foreign firms in their countries. Fiscal competition between governments can take the form of business tax rebates, productivity-enhancing public infrastructure or investment incentives such as tax holidays, accelerated depreciation allowances or loss carry-forward for income tax purposes. It can take place between governments of different countries or between local governments within the same country. This paper surveys the recent theoretical and empirical economic literature on decentralization which attempts to answer three questions. First, does theoretical literature on fiscal competition and "bidding races" contribute to a better understanding of such phenomenon in developing countries? Second, are FDI inflows in developing countries sensitive to fiscal incentives and is there empirical evidence of strategic behavior from the part of developing countries in order to attract FDI? Third, what evidence is there about fiscal competition among local governments in developing countries?
format Publications & Research :: Policy Research Working Paper
author Madies, Thierry
Dethier, Jean-Jacques
author_facet Madies, Thierry
Dethier, Jean-Jacques
author_sort Madies, Thierry
title Fiscal Competition in Developing Countries : A Survey of the Theoretical and Empirical Literature
title_short Fiscal Competition in Developing Countries : A Survey of the Theoretical and Empirical Literature
title_full Fiscal Competition in Developing Countries : A Survey of the Theoretical and Empirical Literature
title_fullStr Fiscal Competition in Developing Countries : A Survey of the Theoretical and Empirical Literature
title_full_unstemmed Fiscal Competition in Developing Countries : A Survey of the Theoretical and Empirical Literature
title_sort fiscal competition in developing countries : a survey of the theoretical and empirical literature
publishDate 2012
url http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100517095203
http://hdl.handle.net/10986/3796
_version_ 1764388393608806400
spelling okr-10986-37962021-04-23T14:02:12Z Fiscal Competition in Developing Countries : A Survey of the Theoretical and Empirical Literature Madies, Thierry Dethier, Jean-Jacques ADDED TAX AGENCY PROBLEM ASYMMETRIC INFORMATION AUCTION AUCTIONS BAILOUT BID BIDS BOND BUDGET CONSTRAINT BUDGET CONSTRAINTS BUSINESS OPPORTUNITIES BUSINESS TAX BUSINESS TAXES CAPITAL FLIGHT CAPITAL FLOWS CAPITAL FORMATION CAPITAL IMPORTER CENTRAL BANK CENTRAL GOVERNMENT CENTRAL GOVERNMENTS CITIES COASTAL PROVINCES COMMITMENT DEVICE COMMON MARKET COMPETITIVE MARKETS CORPORATE INCOME TAX CORPORATE TAX CORPORATE TAX RATE CORPORATE TAX RATES CORPORATE TAXES COST OF CAPITAL COUNTRY MARKET COUNTRY RISK CURRENT EXPENDITURES DECENTRALIZATION DEMOCRACY DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPING ECONOMIES DIFFERENTIALS DIRECT PAYMENTS DISTRICTS DOMESTIC PRICES DOUBLE TAXATION ECONOMIC ANALYSIS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC INTEGRATION EFFECTIVE TAX RATES ENTERPRISE OPERATIONS EQUALIZATION EQUIPMENTS EQUITY INVESTMENT EXCESS SUPPLY EXPENDITURE EXPENDITURE NEEDS EXPENDITURES ON INFRASTRUCTURE EXPORTER EXTERNALITIES FEDERAL SUBSIDIES FEDERAL TRANSFER FINANCIAL CRISIS FINANCIAL MARKETS FINANCIAL STUDIES FISCAL AUTONOMY FISCAL DECENTRALIZATION FISCAL FEDERALISM FISCAL POLICY FISCAL TRANSFERS FIXED CAPITAL FIXED INVESTMENT FOREIGN DIRECT INVESTMENT FOREIGN FIRMS FOREIGN INVESTMENT FOREIGN INVESTORS FOREIGN MARKET FOREIGN TAX CREDITS FREE TRADE FREE TRADE AGREEMENT GLOBALIZATION GOVERNMENT BORROWING GOVERNMENT POLICIES GOVERNMENT REVENUE HARD BUDGET CONSTRAINTS HARMONIZATION HOME COUNTRY HOST COUNTRIES HOST COUNTRY HOST GOVERNMENTS HUMAN CAPITAL IMPLICIT TAX INCOME TAX INDUSTRIAL COUNTRIES INFORMATION ASYMMETRIES INFRASTRUCTURE DEVELOPMENT INFRASTRUCTURE INVESTMENT INSURANCE INSURANCE COMPANIES INTANGIBLE INTANGIBLE ASSETS INTERNATIONAL BANK INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL MOBILITY INTERNATIONAL INVESTORS INTERNATIONAL TRADE INVESTING INVESTMENT BANK INVESTMENT CLIMATE INVESTMENT DECISION INVESTMENT DECISIONS INVESTMENT PROJECTS JURISDICTION JURISDICTIONS LEVEL OF GOVERNMENT LOCAL AUTONOMY LOCAL BUSINESS LOCAL GOVERNMENT LOCAL GOVERNMENTS LOCAL PUBLIC GOOD MARGINAL COST MARKET CONDITION MARKET SIZE MAYOR MUNICIPALITIES MUNICIPALITY NATURAL RESOURCE NET CAPITAL OPPORTUNISTIC BEHAVIOR OPPORTUNITY COST OUTPUT PERSONAL INCOME POLICY CHOICES POLICY DECISIONS POLITICAL ACCOUNTABILITY POLITICAL STABILITY PORTFOLIO POSITIVE EXTERNALITIES POTENTIAL INVESTORS PRIVATE CAPITAL PRIVATE LOANS PRIVATE SECTOR PROPERTY TAX PROVINCE PROVINCES PROVINCIAL GOVERNMENT PROVINCIAL GOVERNMENTS PROVINCIAL LEVEL PROVINCIAL TAX PROVINCIAL TAXES PROVISIONS PUBLIC PUBLIC CONSUMPTION PUBLIC ECONOMICS PUBLIC EXPENDITURE PUBLIC EXPENDITURES PUBLIC FINANCE PUBLIC FUNDS PUBLIC GOODS PUBLIC INFORMATION PUBLIC INFRASTRUCTURE PUBLIC INVESTMENT PUBLIC LOANS PUBLIC POLICY PUBLIC SECTOR PUBLIC SPENDING REGIONAL INTEGRATION REGIONAL TRADE RESOURCE ALLOCATION RETURN RETURNS REVENUE SHARING SMALL COUNTRIES SOCIAL VALUE SOFT BUDGET CONSTRAINT SOFT BUDGET CONSTRAINTS SUB-NATIONAL SUB-NATIONAL GOVERNMENT SUBNATIONAL SUBNATIONAL GOVERNMENT SUBNATIONAL GOVERNMENTS TAX TAX AUTONOMY TAX BASE TAX BASES TAX BREAKS TAX BURDEN TAX CHANGES TAX COMPETITION TAX CONCESSIONS TAX COORDINATION TAX CREDIT TAX CREDITS TAX DIFFERENTIALS TAX INCENTIVES TAX PAYMENTS TAX PLANNING TAX POLICIES TAX POLICY TAX PREFERENCES TAX PROVISION TAX PURPOSES TAX RATE TAX RATES TAX REBATES TAX REDUCTION TAX REGIME TAX REGIMES TAX REVENUE TAX REVENUE SHARING TAX REVENUES TAX SPARING TAX TREATMENT TAX TREATY TAXATION TOTAL GOVERNMENT EXPENDITURE TRANSACTION TRANSACTION COSTS TRANSITION COUNTRIES TREATIES TREATY URBAN ECONOMICS USE TAX UTILITIES VALUATION WORLD TRADE The last two decades have witnessed a sharp increase in foreign direct investment (FDI) flows and increased competition among developing countries to attract FDI, resulting in higher investment incentives offered by host governments and removal of restrictions on operations of foreign firms in their countries. Fiscal competition between governments can take the form of business tax rebates, productivity-enhancing public infrastructure or investment incentives such as tax holidays, accelerated depreciation allowances or loss carry-forward for income tax purposes. It can take place between governments of different countries or between local governments within the same country. This paper surveys the recent theoretical and empirical economic literature on decentralization which attempts to answer three questions. First, does theoretical literature on fiscal competition and "bidding races" contribute to a better understanding of such phenomenon in developing countries? Second, are FDI inflows in developing countries sensitive to fiscal incentives and is there empirical evidence of strategic behavior from the part of developing countries in order to attract FDI? Third, what evidence is there about fiscal competition among local governments in developing countries? 2012-03-19T18:39:58Z 2012-03-19T18:39:58Z 2010-05-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100517095203 http://hdl.handle.net/10986/3796 English Policy Research working paper ; no. WPS 5311 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper The World Region The World Region