Firms need to incur substantial sunk costs to break in foreign markets, yet may give up exporting shortly after their first experience, which typically involves very small sales. Conversely, other new exporters shoot up their foreign sales and expand to new destinations. We investigate a simple...

We study the dynamic support for fiscal decentralisation in a political agency model from the perspective of a region. We show that corruption opportunities are lower under centralization at each period of time. However, centralization makes more difficult for citizens to detect corrupt...

We study the incentives to expropriate foreign capital under democracy and obligarchy. We model a two-sector small open economy where foreign investment triggers Stolper-Samuelson effects through reducing exporting costs. We show how incentives to expropriate depend on the distributional effects...

The recent literature on endogenous political institutions highlights domestic economic factors, such as recessions, economic growth and inequality, as key determinants of political transitions. We argue that international capital flows and the possibility that foreign governments, in order to...

We model subsidy competition for a foreign MNC’s investment in a two-country PTA. Taking into account acquisitions as an alternative investment mode weakens the case for subsidising greenfield investment, even for a single government. Considering competition between member states, it widens...

There is an extensive literature that examines the relationship between foreign direct investment (FDI) and the productivity and competitiveness of domestic firms. Using estimation techniques from the productivity spillover literature, this paper tests for the presence of environmental...

This paper studies a model of announcements by a privately in- formed government about the future state of the economic activity in an economy subject to recurrent shocks and with distortions due to income taxation. Although transparent communication would ex ante be desirable, we find that even...

In a small open economy with heterogeneous firms, in which tariffs determine the mass of active firms, the gains from trade liberalization depend positively on the level of firm vertical heterogeneity and negatively on transportation costs. The benefits from temporary protection depend on the...

We identify characteristics that affect firms' ability to learn from their export activities. Our analysis is based on a panel of Argentinian firms spanning 1992-2001 and we employ Granger causality tests, propensity score matching techniques and GMM regressions. The characteristics we find to...

Regional integration affects location decisions of MNCs and therefore influences each member country’s provision of investment incentives, which in turn may trigger relocation. As a consequence, subsidy competition increases as integration proceeds. We analyze the welfare consequences of this...