Template-Type: ReDIF-Paper 1.0
Author-Name: Oscar Amerighi
Author-Email: oscar.amerighi@unibo.it
Author-Workplace-Name: Dipartimento di Scienze Economiche, Universitˆ di Bologna
Author-Name: Giuseppe De Feo
Author-Email:  giuseppe.defeo@strath.ac.uk
Author-Workplace-Name: Departments of Economics, University of Strathclyde
Title: On the FDI-Attracting Property of Privatization
Abstract: In the present paper we provide an explanation of why privatization may attract foreign investors willing to enter a regional market. Privatization turns the formerly-public firm into a less aggressive competitor since profit-maximizing output is lower than the welfare-maximizing one. The drawback is that social welfare generally decreases. We also investigate tax/subsidy competition for FDI and put forward its potentially positive role. On the one hand, it may reduce the negative impact on welfare of an FDIattracting privatization. On the other hand, it may prevent a welfare-reducing investment by the foreign firm. This shows that privatization and fiscal policies may be either alternative or complementary instruments depending on the government's objective (i.e., country's attractiveness for foreign investors and domestic welfare)
Creation-Date: 2000-18
Publication-Status: Published in Working Papers, June 2010, pages 1-36
File-URL:https://www.dises.unisa.it/RePEc/sep/wpaper/3_214.pdf
File-Function:First version, 
Number:3_214
Classification-JEL:ÊF23, H73, L33
Keywords:  Foreign Direct Investment, Privatization, Tax/Subsidy Competition
Handle:RePEc:sep:wpaper:3_214