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Entry Policy in an Open Economy

Author

Listed:
  • Paul E. Jensen

    (Pennsylvania State University)

  • Kala Krishna

    (Pennsylvania State University)

Abstract

We show that with both home and foreign firms present in a market, liberalization of entry could raise or lower welfare. When goods are homogenous, we show that the optimum number of firms depends on the extent to which foreign firms are present. We show that the optimum number of firms exceeds the free entry level if there is enough of a foreign presence as measured by the fraction of foreign firms present in the domestic market. We also show how factors such as the source of entry, home or foreign, the extent of product differentiation within and between home and foreign firms, and the extent of fixed costs affect the desirability of free entry.

Suggested Citation

  • Paul E. Jensen & Kala Krishna, 1996. "Entry Policy in an Open Economy," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 31(1), pages 41-56, January.
    • Handle: RePEc:dse:indecr:v:35:y:1996:i:1:p:41-56
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    Citations

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    Cited by:

    1. Aditya Bhattacharjea, 2000. "Foreign Entry and Domestic Welfare: Can "Market Discipline" Be Excessive?," Working papers 83, Centre for Development Economics, Delhi School of Economics.
    2. M Suresh Babu, 2007. "Economic Reforms And Entry Barriers In Indian Manufacturing," Working Papers id:978, eSocialSciences.
    3. Aditya Bhattacharjea, 2001. "Foreign entry and domestic welfare: lessons for developing countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 11(2), pages 143-162.
    4. M. Suresh Babu, 2002. "Economic reforms and entry barriers in Indian manufacturing," Centre for Development Studies, Trivendrum Working Papers 331, Centre for Development Studies, Trivendrum, India.

    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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