Foreign Entry and Domestic Welfare: Can "Market Discipline" Be Excessive?
AbstractThis paper examines the effects of foreign entry, in the form of either imports or direct foreign investment, into an oligopolistic market. It shows that foreign entry can reduce welfare relative to autarky unless at least some domestic firms exit, or unless the foreign firms capture a very large share of the home market. However, it also shows that an optimal tariff can prevent this welfare decline. The paper concludes with some suggestive empirical evidence, and implications are drawn for trade and investment liberalization, as well as for domestic and international competition policy.
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Bibliographic InfoPaper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 83.
Length: 20 pages
Date of creation: Jul 2000
Date of revision:
Find related papers by JEL classification:
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
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