Economics Brown Bag Seminar Series - Kate Hynes (University College Dublin)

Title: Competition in Taxes and Intellectual Property Rights

Abstract: Our paper examines competition for foreign direct investment when governments use tax incentives along with intellectual property rights (IRPs). Higher IPRs result in a lower probability of the foreign firm being imitated. From the firm’s point of view, lower taxes and higher IPRs are preferable. From a government’s perspective, while lower taxes are less beneficial all else equal, there is a trade off from higher IPRs. On the one hand, stronger IPRs are attractive because they increase the MNE’s expected profits, thus increasing tax revenues. Whereas on the other hand, weaker IPRs both cost less and, by increasing the chance of competition, result in lower expected prices benefiting consumers. Our paper explores the interplay of these differing motivations, both unilaterally and jointly between the two potential host countries.