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David Wettstein, Israel Luski and Todd Kaplan
''Government policy towards multi-national corporations''
( 2003, Vol. 6 No.3 )
We analyze an environment with asymmetric information where a country tries to attract a multi-national corporation. The country can use both taxes and grants to meet its objective of maximizing net revenues. We show that when the country has private information it can often convey it via its choice of a tax-grant pair. When the tax rates are unbounded the country is able to extract the full surplus. The existence of an upper bound can in some cases reduce the payoff to a stronger country.
Keywords: Foreign Direct Investment
F2 - International Factor Movements and International Business: General
Manuscript Received : May 20 2003 Manuscript Accepted : May 20 2003

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