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[en] This paper investigates whether a less-developed economy can catch up with
a more developed one when they compete for foreign direct investments. The
main message of the paper is that jurisdictional competition can enable the lagging
country to catch up if capital mobility is sufficiently high and the productivity gap
is not too large. Further, we show that size asymmetry reinforces (weakens) the
productivity catch-up resulting from interjurisdictional competition when the lagging
economy is small (large). Finally, we demonstrate that the development gap
widens when capital becomes less mobile, which is at odds with previous findings.