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Migration of Firms, Home Bias and Economic Growth

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  • Aharonovitz Gilad D

    (Washington State University)

Abstract

This study analyzes the effects of government policies on the short-run and long-run movement of locally owned firms from a developed country to a less-developed country and on the output and growth rate of each country in the presence of home bias, a preference of firms and investors to operate in their home countries. The analysis uses a model which was developed for this purpose, in which growth is stemming from the increase in the number of firms. The study finds that for the less-developed country, harsh policy towards entering firms, such as taxing them in the form of requiring firms to grant partial ownership to local agents, results in better long-run economic performance, compared to free entry or subsidizing these firms, in addition to the harsh policy being less costly.

Suggested Citation

  • Aharonovitz Gilad D, 2011. "Migration of Firms, Home Bias and Economic Growth," Global Economy Journal, De Gruyter, vol. 11(2), pages 1-30, July.
    • Handle: RePEc:bpj:glecon:v:11:y:2011:i:2:n:3
    DOI: 10.2202/1524-5861.1639
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    References listed on IDEAS

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