Theoretical Models Based on a Flowchart Approach to Industrial Cluster Policy
AbstractThis article examined the issue of whether or not the currency exchange rate, country risk, and cooperate tax rate affect decisions of multinational firms to invest in industrial clusters. First, if the exchange rate between a multinational company in an industry of diminishing returns to scale and a developing country is appreciated, then production in the developing country should increase. Second, if the investment period becomes longer, the currency exchange rate of a multinational company's country should be revalued more in order for it to further invest in the developing country. Third, if the investment period becomes longer, the developing country's risk should become less. Fourth, compensation for the developing country's high risk can be made by lowering its corporate tax rate.
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Bibliographic InfoPaper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 33.
Date of creation: Aug 2005
Date of revision:
Publication status: Published in IDE Discussion Paper. No. 33. 2005.8
Postal: Publication Office, IDE 3-2-2 Wakaba, Mihama-ku, Chiba-shi, Chiba 261-8545 JAPAN
Find related papers by JEL classification:
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L5 - Industrial Organization - - Regulation and Industrial Policy
- R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-03 (All new papers)
- NEP-CSE-2007-02-03 (Economics of Strategic Management)
- NEP-SEA-2007-02-03 (South East Asia)
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