Public Investment, Taxation and Transfer of Technology

Kollias, Iraklis and Marjit, Sugata and Michelacakis, Nickolas (2017): Public Investment, Taxation and Transfer of Technology.

Abstract

A low wage developing economy (South) is interested in accessing and attracting superior technology from a high wage developed economy (North) with firms having heterogeneous quality of technology. To improve upon the initial market equilibrium, which shows that relatively inefficient technologies will move to the South, the host government invests in infrastructure financed through taxing the foreign firms. We discuss the problem of existence of such a tax-transfer mechanism within a balanced budget framework. We argue that such a policy can increase tax revenue as well as instigate the transfer of better quality technology. It turns out that this policy is more likely to be successful when the production concerns high value, high price products in low wage economies. Our results improve upon the conventional strategy of a tax break.

• Item Type: MPRA Paper
• Language: English
• Keywords: public investment, tax, high-low wage economy, technology transfer, model
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D42 - Monopoly; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes

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