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Endogenous Market Structures and the Gains from Foreign Direct Investment

Author

Listed:
  • De Santis, Roberto A

    (European Central Bank)

  • Frank Stahler

    (University of Kiel)

Abstract

This paper discusses the gains from liberalizing foreign direct investment (FDI) in a two country setting with endogenous market structures. Two different scenarios are investigated. In the first scenario, headquarters are run in the domestic country only and the FDI regime is compared to the intersectoral trade case. If multinational and national firms coexist, market concentration occurs and FDI is welfare improving for the foreign country, but welfare declining for the domestic country. In the second scenario, headquarters are run in both countries and the FDI regime is compared to the intraindustry trade case. This regime switch leads to mutual welfare gains, irrespective of market structure effects.

Suggested Citation

  • De Santis, Roberto A & Frank Stahler, 2002. "Endogenous Market Structures and the Gains from Foreign Direct Investment," Royal Economic Society Annual Conference 2002 56, Royal Economic Society.
    • Handle: RePEc:ecj:ac2002:56
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    Cited by:

    1. Jacques, Armel, 2006. "Des firmes multinationales : un survol de la littérature microéconomique," L'Actualité Economique, Société Canadienne de Science Economique, vol. 82(4), pages 643-691, décembre.
    2. Mugele, Christian & Schnitzer, Monika, 2008. "Organization of multinational activities and ownership structure," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1274-1289, November.
    3. Nishiyama, Hiroyuki & Yamaguchi, Masao, 2010. "Foreign direct investment, international trade, and firm heterogeneity," Economic Modelling, Elsevier, vol. 27(1), pages 184-195, January.
    4. Abdelhakim Hammoudi & Wadii Hatit, 2004. "Multinationals and the Training of Workers in Developing Countries," Working Papers 0427, Economic Research Forum, revised 11 Apr 2004.
    5. Anderton, Robert & Hijzen, Alexander & De Santis, Roberto A., 2004. "On the determinants of euro area FDI to the United States: the knowledge- capital-Tobin's Q framework," Working Paper Series 329, European Central Bank.
    6. Roberto A. De Santis & Frank Stähler, 2009. "Foreign Direct Investment and Environmental Taxes," German Economic Review, Verein für Socialpolitik, vol. 10(1), pages 115-135, February.
    7. Onur A. Koska & Ngo Van Long & Frank Stähler, 2018. "Foreign direct investment as a signal," Review of International Economics, Wiley Blackwell, vol. 26(1), pages 60-83, February.
    8. Roberto A. De Santis & Frank Stähler, 2009. "Foreign Direct Investment and Environmental Taxes," German Economic Review, Verein für Socialpolitik, vol. 10(1), pages 115-135, February.
    9. Federico Etro, 2014. "The Theory Of Endogenous Market Structures," Journal of Economic Surveys, Wiley Blackwell, vol. 28(5), pages 804-830, December.
    10. Stahler, Frank, 2006. "Market entry and foreign direct investment," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 335-347, March.
    11. Animashaun, Jubril Olayinka & Ojehomon, Vivian EbihomonTitilayo & Muhammad-Lawal, Abdulazeez & Amolegbe, Khadijah Busola, 2015. "Between Foreign Direct Investment (Fdi) And Outsourcing: Which Policy Strategy Will Enhance The Competitiveness Of The Nigerian Rice Sector?," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 3(2), pages 1-15, April.
    12. repec:got:cegedp:22 is not listed on IDEAS
    13. Elberfeld Walter & Götz Georg & Stähler Frank, 2005. "Vertical Foreign Direct Investment, Welfare, and Employment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-30, February.
    14. Federico Etro, 2012. "Endogenous Market Structures and International Trade. II: Optimal Trade Policy," Working Papers 2012:32, Department of Economics, University of Venice "Ca' Foscari".
    15. De Santis, Roberto A. & Ehling, Paul, 2007. "Do international portfolio investors follow firms' foreign investment decisions?," Working Paper Series 815, European Central Bank.

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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