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Privatization, strategic foreign direct investment and host-country welfare

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  • Mukherjee, Arijit
  • Suetrong, Kullapat

Abstract

Recent evidence shows that developing countries and transition economies are increasingly privatizing their public firms and at the same time experiencing rapid growth of inward foreign direct investment (FDI). We show that there is a two-way causality between privatization and greenfield FDI. Privatization increases the incentive for FDI, which, in turn, increases the incentive for privatization compared to the situation of no FDI. The optimal degree of privatization depends on the cost difference of the firms, and on the foreign firm's mode of entry.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 53 (2009)
Issue (Month): 7 (October)
Pages: 775-785

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Handle: RePEc:eee:eecrev:v:53:y:2009:i:7:p:775-785

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Web page: http://www.elsevier.com/locate/eer

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Keywords: Privatization Greenfield FDI Welfare;

References

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Citations

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Cited by:
  1. Wang, Leonard F.S. & Lee, Jen-yao & Hsu, Chu-chuan, 2014. "Privatization, foreign competition, and social efficiency of free entry," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 138-147.
  2. Campos, Nauro F. & Horváth, Roman, 2012. "On the reversibility of structural reforms," Economics Letters, Elsevier, vol. 117(1), pages 217-219.
  3. Wang, Leonard F.S. & Chen, Tai-Liang, 2011. "Mixed oligopoly, optimal privatization, and foreign penetration," Economic Modelling, Elsevier, vol. 28(4), pages 1465-1470, July.
  4. Oscar Amerigi & Giuseppe De Feo, 2010. "On the FDI-atrracting property of privatization," Working Papers 1007, University of Strathclyde Business School, Department of Economics.
  5. Mukherjee, Arijit & Sinha, Uday Bhanu, 2014. "Can cost asymmetry be a rationale for privatisation?," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 497-503.
  6. Dong, Quan & Bárcena-Ruiz, Juan Carlos, 2014. "Corruption and decisions on opening up markets," Economic Modelling, Elsevier, vol. 36(C), pages 23-29.
  7. Matsumura, Toshihiro, 2012. "Welfare consequence of an asymmetric regulation in a mixed Bertrand duopoly," Economics Letters, Elsevier, vol. 115(1), pages 94-96.
  8. Reece, Christopher & Sam, Abdoul G., 2012. "Impact of Pension Privatization on Foreign Direct Investment," World Development, Elsevier, vol. 40(2), pages 291-302.
  9. Ming Lin & Toshihiro Matsumura, 2012. "Presence of foreign investors in privatized firms and privatization policy," Journal of Economics, Springer, vol. 107(1), pages 71-80, September.

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