Governments frequently offer tax incentives to induce localized investments. This is puzzling because previous research finds tax incentives are rarely decisive factors in firms’ locational decision-making. Some argue incentives reflect hyper capital mobility, which strengthens multinational enterprises’ bargaining leverage vis-à-vis governments that wish to attract investment. Others emphasize the domestic political institutions and electoral considerations that incentivize politicians to publicly court investors. We argue that firms’ leverage over governments stems from investment characteristics associated with governments’ broader development objectives. We test our argument on deal-level data on investment incentives in Latin America from 2010 to 2017. Our results indicate firms are more likely to receive incentives when they are already embedded in local markets and when they exhibit characteristics associated with low ex post mobility. These results challenge widely held beliefs over what provides firms political power in an age of globalization, and suggest that governments use incentives primarily to fulfill their economic and political objectives rather than because globalization destroys states’ capacity to tax mobile capital.

政府经常提供税收优惠以吸引本地化投资。令人费解的是，以前的研究发现，税收优惠政策很少是企业选址决策的决定性因素。一些人认为，激励措施反映出过度的资本流动性，这增强了跨国企业相对于希望吸引投资的政府的议价能力。其他人则强调国内政治机构和选举考虑因素，这些因素会激励政客公开招揽投资者。我们认为，企业对政府的杠杆作用源于与政府更广泛的发展目标相关的投资特征。我们针对2010年至2017年拉丁美洲投资激励措施的交易级数据检验了我们的论点。我们的结果表明，当企业已经进入本地市场并表现出与事后流动性低相关的特征时，它们更有可能获得激励。这些结果挑战了人们对在全球化时代为企业提供政治权力的信念，人们认为这主要是因为政府使用激励措施主要是为了实现其经济和政治目标，而不是因为全球化破坏了国家对流动资本征税的能力。