Coming Attractions
I am currently working on a new book titled The Political Economy of Investment Incentives: Competing for Investment on a Global Scale. This will mark a substantial expansion of the study I did for the International Institute for Sustainable Development, with several brand-new elements.
One major addition will be a chapter on Ireland. A lot of economic development officials worldwide tout Ireland as a model for growth through investment subsidies and low corporate income taxes. The problem with this argument is subsidies and low taxes were the centerpiece of Ireland's development strategy since the late 1950s, and for a good three decades they didn't have much to show for it. Only in the 1990s did the economy really take off, and even then many people were left behind.
What changed? That question animates the chapter. Some plausible candidates are greater attention to indigenous industry (rather than just throwing money at foreign multinationals), the accumulation of infrastructure through European Union Structural Funds, better targeting of investment incentives to create clusters, and a social partnership between government, capital, and labor.
Additionally, the chapter will speculate on what the future might hold for the Celtic Tiger. EU state aid rules now sharply limit the subsidies the country can give, its allocation of Structural Funds has been reduced since it became one of the EU's richer countries, and questions remain about whether the country's 12.5% corporate tax rate can sustain the government's budget. There is also a lot of political sniping at the tax rate, which is far below the average of other prosperous EU members. France and Luxembourg have been particularly vocal about Ireland's alleged poaching of investment, and many countries consider it a tax haven. The political pressure is sure to continue.
I don't have answers to those questions yet (that's why we do research!), but I think there will be some interesting lessons to be learned.
One major addition will be a chapter on Ireland. A lot of economic development officials worldwide tout Ireland as a model for growth through investment subsidies and low corporate income taxes. The problem with this argument is subsidies and low taxes were the centerpiece of Ireland's development strategy since the late 1950s, and for a good three decades they didn't have much to show for it. Only in the 1990s did the economy really take off, and even then many people were left behind.
What changed? That question animates the chapter. Some plausible candidates are greater attention to indigenous industry (rather than just throwing money at foreign multinationals), the accumulation of infrastructure through European Union Structural Funds, better targeting of investment incentives to create clusters, and a social partnership between government, capital, and labor.
Additionally, the chapter will speculate on what the future might hold for the Celtic Tiger. EU state aid rules now sharply limit the subsidies the country can give, its allocation of Structural Funds has been reduced since it became one of the EU's richer countries, and questions remain about whether the country's 12.5% corporate tax rate can sustain the government's budget. There is also a lot of political sniping at the tax rate, which is far below the average of other prosperous EU members. France and Luxembourg have been particularly vocal about Ireland's alleged poaching of investment, and many countries consider it a tax haven. The political pressure is sure to continue.
I don't have answers to those questions yet (that's why we do research!), but I think there will be some interesting lessons to be learned.
