Wu, Y.-C.Y.-C.WuSHIKUAN CHENChang, M.-J.M.-J.Chang2020-02-152020-02-152019https://scholars.lib.ntu.edu.tw/handle/123456789/459572This study analyzes the macroeconomic impacts of subsidies to attract multinational corporations when firms are determining whether to enter or how to serve foreign markets. We show that a small FDI subsidy scheme induces consumption gains and delivers short-term welfare improvement for the FDI host country if firms differ in productivity. However, the subsidy generates a new problem and results in the wealth reallocation effect, leading to welfare deterioration for the host country in the long run. Moreover, we find that a subsidy program induces a welfare improvement for the host country if it is offered to all domestic producers instead of foreign producers only in the host country. © 2019 John Wiley & Sons Ltd[SDGs]SDG10economic impact; foreign direct investment; general equilibrium analysis; heterogeneity; multinational enterprise; stochasticity; subsidy systemjournal article10.1111/roie.124302-s2.0-85070820190https://www.scopus.com/inward/record.uri?eid=2-s2.0-85070820190&doi=10.1111%2froie.12430&partnerID=40&md5=767b6987363e16c2667a986c631fd9f6