Multinational Investment, Industry Risk and Policy Competition
AbstractIn an uncertain business climate, multinational enterprises must take account of future exit costs in deciding where to locate a branch plant. We study how differences in national labour-market conditions between countries influence this decision. Other things equal, the most attractive location has a flexible labour market (low closure costs) together with a low opportunity cost of employment (high unemployment). In a game between two countries, a nation with an inflexible labour market and high unemployment will succeed in attracting low-risk firms, while that with more flexible labour markets and low unemployment will win the game for higher risk firms.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3152.
Date of creation: Jan 2002
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Find related papers by JEL classification:
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-03-14 (All new papers)
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