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Contracts, intellectual property rights, and multinational investment in developing countries

In: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models

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  • James R. Markusen

Abstract

The policy debate between multinational firms favoring strong contract law, and host-country governments who often oppose such protection motivates the paper. Local agents (managers) learn the multinational’s technology and can defect to start a rival firm. Contract enforcement, including binding the multinational itself, makes the multinational better off. Outcomes for the host country are more complex, depending on mode switches induced by enforcement. If enforcement induces the multinational to switch from exporting to local production, welfare improves. If local production was occurring anyway, enforcement may result in the loss of rents to local agents and lower welfare.

Suggested Citation

  • James R. Markusen, 2021. "Contracts, intellectual property rights, and multinational investment in developing countries," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 8, pages 159-174, World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789811222962_0008
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    References listed on IDEAS

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    More about this item

    Keywords

    Multinational Firms; Horizontal Multinationals; Vertical Multinationals; Internalization; Vertical Integration; Outsourcing; Foreign Affiliates; Per-Capita Income; Non-homothetic Preferences; Income Elasticity of Demand; Missing Trade Puzzle; Skill Premium Puzzle; Pro-competitive Gains From Trade; Complements; Externalities;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F00 - International Economics - - General - - - General
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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