Pii: S1059-0560(99)00031-3
نویسندگان
چکیده
This paper explores the welfare consequences of foreign investment taxation in a small open economy, based on the notion that the true productivity of imported capital may be unknown to policy-makers. It is shown that while asymmetric information between capital importers and the host government precludes the use of a productivity specific policy measure, an across-the-board policy suffers from the problem of adverse selection among capital imports of differential productivities. Conditions under which a reversal of the optimal foreign investment policy in the face of asymmetric information are examined. 1999 Elsevier Science Inc. All rights reserved. JEL classification: D82; F13; F21
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