Governance, foreign direct investment and domestic welfare
AbstractThe issue of economic governance is highly discussed pertaining to the question of industrialisation of a country, but the literature on trade and foreign direct investment (FDI) hardly pays attention to this aspect. We develop a simple model to show how good economic governance in the domestic country, reducing domestic marketing and distribution costs, affects inward FDI and domestic welfare. Whether good governance in the domestic country attracts FDI depends on the way it affects the marketing and distribution costs. The effect of good governance is ambiguous on domestic welfare and depends on the cost difference between the firms, international transportation cost and the extent of cost reduction. Our analysis reveals strategic reasons for poor governance in some situations in the presence of foreign competition.
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Bibliographic InfoArticle provided by Elsevier in its journal International Review of Economics & Finance.
Volume (Year): 27 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/620165
Foreign direct investment; Governance; Welfare;
Other versions of this item:
- Dibyendu Maiti & Arijit Mukherjee, . "Governance, Foreign Direct Investment and Domestic Welfare," Discussion Papers 10/27, University of Nottingham, GEP.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- H0 - Public Economics - - General
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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