Publication detail

On the Intensity of International Subsidy Competition

Author(s): prof. PhDr. Tomáš Havránek Ph.D.,
doc. PhDr. Zuzana Havránková Ph.D.,
Type: Articles in journals with impact factor
Year: 2010
Number: 2
Published in: Theoretical and Applied Economics, Volume XVII (2010), No. 2(543), pp. 25-54
Publishing place:
Keywords: investment incentives, foreign direct investment, panel data, subsidy competition
JEL codes: C21, C23, F21, F23, H25
Suggested Citation:
Grants: IES Research Framework Institutional task (2005-2011) Integration of the Czech economy into European union and its development
Abstract: The objective of this paper is to empirically assess the recently introduced models of subsidy competition based on the classical oligopoly theories. Three crucial scenarios (coordination, weak competition, and fierce competition) are tested employing iteratively re-weighted least squares, fixed effects, and dynamic Blundell-Bond estimator on the data from the World Competitiveness Yearbook. The results suggest that none of the scenarios can be strongly supported – although there is some weak support for cooperation –, and thus that empirical evidence is not in accordance with the tested models. There is no evidence for a significant international competition for FDI. It seems that, however, by means of FDI incentives, governments try to compensate foreign investors for high wages and low productivity of their countries’ labor force.


Česká Spořitelna


Patria Finance