Commercial Policy and Foreign Ownership
AbstractTo serve the domestic market, foreign multinationals often not only export there but also control local firms through FDI. This paper examines the effects of trade and industrial policies on prices, outputs, profits, and welfare when exports and FDI coexist. Specifically, we focus on the case in which a foreign firm has full control of a local firm through partial ownership. Cross-border ownership on the basis of both financial interests and corporate control leads to horizontal market-linkages through which tariffs and production subsidies may harm a locally-owned firm but benefit a foreign firm. Foreign ownership regulation benefits a locally-owned firm.
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Bibliographic InfoPaper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd08-005.
Date of creation: Oct 2008
Date of revision:
foreign direct investment; corporate control; tariffs; production subsidies; ownership regulation;
Other versions of this item:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- 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-2008-10-28 (All new papers)
- NEP-INT-2008-10-28 (International Trade)
- NEP-REG-2008-10-28 (Regulation)
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