Publication

This paper sets out the main elements of the concept of locational competition and analyzes its impact on welfare and employment of the capital-exporting country. The author investigates whether competition between countries result in a race to the bottom or whether it can function as a controlling mechanism. Moreover, he discusses under which conditions common rules are needed to reduce transaction costs and to prevent the strategic, opportunistic behavior of countries. Additionally, he addresses the question of whether one can expect one institutional equilibrium in the world economy or whether many national equilibria can coexist.