We develop a model of fiscal competition for foreign direct investment and show that the decision of multinational firms to locate in the proximity of indigenous firms—which can be thought of as agglomeration—may be the result of the provision of government incentives that aim to capitalise on the potential for knowledge spillovers to indigenous industry. Somewhat different but complementary to existing literature, we also show that fiscal competition may increase the welfare of both winning and losing countries in the auction for the multinational firm when it leads to the relocation of multinationals away from countries that do not have the potential to benefit from knowledge spillovers to countries that do. As trade costs fall and the potential for knowledge spillovers increases, both outcomes become more likely in equilibrium.

中文翻译：

---

具有知识溢出效应和贸易成本的外国直接投资的财政竞争

我们开发了一个外国直接投资的财政竞争模型，并表明跨国公司决定靠近本土公司——这可以被认为是集聚——可能是政府提供旨在资本化的激励措施的结果关于知识溢出到本土产业的潜力。与现有文献有些不同但又是互补的，我们还表明，财政竞争可能会增加跨国公司拍卖中获胜和失败国家的福利，因为它会导致跨国公司从没有潜力受益的国家迁移出去。从知识溢出到这样做的国家。随着贸易成本的下降和知识溢出的可能性增加，这两种结果都更有可能处于均衡状态。