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Equity Control of Multinational Firms: Effects on Resource Allocation and National Welfare

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  • Hamid Beladi
  • Shigemi Yabuuchi

Abstract

In this paper, we re-examine the effects of equity control of multinational firms on resource allocation and national welfare in a model with rural-urban migration and urban unemployment. A large number of recipient (host) countries are developing countries with dual economies. We indicate, among other things, that a restriction on multinational investment may lower the unemployment rate and increase the total employment in the host country. Furthermore, we find that the restriction on multinational investment raises the national welfare in the host economy if the tariff imposed on imports is sufficiently large and the difference between domestic and foreign capital rental is sufficiently small. Copyright © 2010 Blackwell Publishing Ltd.

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  • Hamid Beladi & Shigemi Yabuuchi, 2010. "Equity Control of Multinational Firms: Effects on Resource Allocation and National Welfare," Review of Development Economics, Wiley Blackwell, vol. 14(1), pages 93-102, February.
  • Handle: RePEc:bla:rdevec:v:14:y:2010:i:1:p:93-102
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    References listed on IDEAS

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    1. Bhagwati, Jagdish N & Srinivasan, T N, 1974. "On Reanalyzing the Harris-Todaro Model: Policy Rankings in the Case of Sector-Specific Sticky Wages," American Economic Review, American Economic Association, vol. 64(3), pages 502-508, June.
    2. Hill, John K & Mendez, Jose A, 1992. "Equity Control of Multinational Firms by Less Developed Countries: A General Equilibrium Analysis," The Manchester School of Economic & Social Studies, University of Manchester, vol. 60(1), pages 53-63, March.
    3. Neary, J Peter, 1981. "On the Harris-Todaro Model with Intersectoral Capital Mobility," Economica, London School of Economics and Political Science, vol. 48(191), pages 219-234, August.
    4. Yabuuchi, Shigemi, 1993. "Urban unemployment, international capital mobility and development policy," Journal of Development Economics, Elsevier, vol. 41(2), pages 399-403, August.
    5. Khan, M. Ali, 1982. "Tariffs, foreign capital and immiserizing growth with urban unemployment and specific factors of production," Journal of Development Economics, Elsevier, vol. 10(2), pages 245-256, April.
    6. Hamid Beladi & Chi-Chur Chao, 2006. "Mixed Ownership, Unemployment, and Welfare for a Developing Economy," Review of Development Economics, Wiley Blackwell, vol. 10(4), pages 604-611, November.
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    8. Hamada, Koichi, 1974. "An economic analysis of the duty-free zone," Journal of International Economics, Elsevier, vol. 4(3), pages 225-241, August.
    9. Chi-Chur Chao & Eden S. H. Yu, 2014. "Domestic Equity Controls of Multinational Enterprises," World Scientific Book Chapters,in: TRADE-RELATED INVESTMENT MEASURES Theory and Applications, chapter 11, pages 165-175 World Scientific Publishing Co. Pte. Ltd..
    10. Batra, Raveendra N & Ramachandran, Rama, 1980. "Multinational Firms and the Theory of International Trade and Investment," American Economic Review, American Economic Association, vol. 70(3), pages 278-290, June.
    11. Marjit, Sugata & Beladi, Hamid, 2003. "Possibility or impossibility of paradoxes in the small country Harris-Todaro framework: a unifying analysis," Journal of Development Economics, Elsevier, vol. 72(1), pages 379-385, October.
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    15. Chi-Chur Chao & Eden S. H. Yu, 2006. "Partial Privatization, Foreign Competition, and Optimum Tariff," Review of International Economics, Wiley Blackwell, vol. 14(1), pages 87-92, February.
    16. Chao, Chi-Chur & Yu, Eden S.H., 2007. "Trade liberalization, foreign ownership, and the environment in a small open economy," International Review of Economics & Finance, Elsevier, vol. 16(4), pages 471-477.
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    Cited by:

    1. Igor Gurkov, 2015. "Russian Manufacturing Subsidiaries of Western Multinational Corporations: Support from Parents and Cooperation with Sister-Subsidiaries," HSE Working papers WP BRP 37/MAN/2015, National Research University Higher School of Economics.
    2. Hamid Beladi & Chi-Chur Chao & Daniel Hollas, 2013. "Does globalization weaken labor unions in developing countries?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(4), pages 562-571, June.

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