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ESTIMATING THE RIVALNESS OF STATE-LEVEL INWARD FDI

Authors


  • We thank Bob Chirinko and Dan Wilson for allowing us to use their data, and Charles van Marrewijk (the guest editor), two anonymous referees, and participants at the 2011 Annual Meeting of the Urban Economics Association in Miami for useful comments. We gratefully acknowledge financial support from the Barcelona Institute of Economics (IEB), and from the Swiss National Science Foundation (Sinergia Grants 130648 and 147668; and NCCR “Trade Regulation”).

ABSTRACT

We develop a method for estimating the rivalness of tax bases using the structures of the conditional logit, Poisson, and nested logit models. As an illustration, we apply this method to estimate the effect of state-level capital taxation on U.S. inward foreign direct investment (FDI). The assumption of perfect nonrivalness can in some cases be rejected, but the assumption of perfect rivalness cannot. Competition over FDI across U.S. states could well be a zero-sum game.

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