Firm Productivity and the Foreign‐Market Entry Decision

We use Japanese firm‐level data to examine how a firm’s productivity affects its foreign‐market entry strategy. The firm faces a choice between exporting and foreign direct investment (FDI). In the case of FDI, the firm has two options: greenfield investment or acquisition of an existing plant (M&A). If it selects greenfield investment, it has two ownership choices: whole ownership or a joint venture with a local company. Controlling for industry‐ and country‐specific characteristics, we find that the more productive a firm is, the more likely it is to choose FDI rather than exporting and greenfield investment rather than M&A.     

Europe – Quo Vadis? Reflections on the Future Institutional Framework of the European Union

With twelve new members the decision making in the European Union via intergovernmental cooperation will become ineffective. The EU is at the Cross Roads. In order to avoid a Stagno‐Europe the EU has a choice: Either it looks for the very essentials in the common institutional framework and adjusts it accordingly or the member states agree in ceding national sovereignty to the European level. This, however, requires that the democratic deficit at the EU level is reduced. The Treaty of Nice has failed to solve these issues. The paper elaborates in detail the non‐essentials and the essentials of European integration and discusses the basics of an approach to a constitution‐like arrangement for Europe.     

Corporate Tax Consolidation and Enhanced Cooperation in the European Union*

We assess the economic impact of introducing consolidation with formula apportionment in the European Union and consider alternative enhanced cooperation agreements. We find that the consolidation is likely to yield a small aggregate welfare gain in Europe. However, not all countries benefit. A coalition of winning countries reduces the welfare gain and may induce a process of adverse selection which destroys the possibility of cooperation. We find that a coalition of similar countries (in terms of the size of their multinational sector) is more feasible in achieving agreement and is actually preferred by those countries over a Europe‐wide reform.