Kessing, Sebastian G.; Konrad, Kai A.; Kotsogiannis, Christos
Federal tax autonomy and the limits of cooperation.
WZB Discussion Paper, SP II 2005-18
Full text not available from 'Open Access LMU'.
We consider the hold-up problem between a foreign direct investor and the
government(s) in a host country with weak governmental structure and lack of
power to commit. Using "Nash threats", we show that an efficient investment
level can be sustained for a sufficiently high discount factor and ask whether a
federal structure makes collusion more or less sustainable. We show that
collusion between the government and the investor is easier to sustain if the
host country is more centralized or if the government layers can commit to fixed