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Commercial Policy and Foreign Ownership

  • Jota Ishikawa
  • Yoichi Sugita
  • Laixun Zhao

To serve the domestic market, foreign multinationals often not only export there but also control local firms through FDI. This paper examines the effects of trade and industrial policies on prices, outputs, profits, and welfare when exports and FDI coexist. Specifically, we focus on the case in which a foreign firm has full control of a local firm through partial ownership. Cross-border ownership on the basis of both financial interests and corporate control leads to horizontal market-linkages through which tariffs and production subsidies may harm a locally-owned firm but benefit a foreign firm. Foreign ownership regulation benefits a locally-owned firm.

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File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd08-005.pdf
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Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd08-005.

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Date of creation: Oct 2008
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Handle: RePEc:hst:ghsdps:gd08-005
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  1. Morita, Hodaka, 2001. "Partial Ownership Induces Customised Investments under Repeated Interaction: An Explanation of Japanese Manufacturer-Suppliers Relationships," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(3), pages 345-59, August.
  2. Lee, Sanghack, 1990. "International equity markets and trade policy," Journal of International Economics, Elsevier, vol. 29(1-2), pages 173-184, August.
  3. Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
  4. Jota Ishikawa & Yoichi Sugita & Laixun Zhao, 2009. "Corporate Control, Foreign Ownership Regulations and Technology Transfer," The Economic Record, The Economic Society of Australia, vol. 85(269), pages 197-209, 06.
  5. Barbara J. Spencer, 2005. "International Outsourcing and Incomplete Contracts," NBER Working Papers 11418, National Bureau of Economic Research, Inc.
  6. Qiu, Larry D. & Spencer, Barbara J., 2002. "Keiretsu and relationship-specific investment: implications for market-opening trade policy," Journal of International Economics, Elsevier, vol. 58(1), pages 49-79, October.
  7. Benson, Bruce L. & Hartigan, James C., 1983. "Tariffs which lower price in the restricting country : An analysis of spatial markets," Journal of International Economics, Elsevier, vol. 15(1-2), pages 117-133, August.
  8. Jota Ishikawa & Hiroshi Mukunoki, 2008. "Effects of Multilateral Trade Liberalization on Prices," Review of International Economics, Wiley Blackwell, vol. 16(1), pages 37-44, 02.
  9. Lahiri, Sajal & Ono, Yoshiyasu, 1988. "Helping Minor Firms Reduces Welfare," Economic Journal, Royal Economic Society, vol. 98(393), pages 1199-1202, December.
  10. Long, N.V. & Soubeyran, A., 1998. "International Cross Ownership And Strategic Trade Policies," G.R.E.Q.A.M. 98a21, Universite Aix-Marseille III.
  11. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
  12. Flath, David, 1991. "When is it rational for firms to acquire silent interests in rivals?," International Journal of Industrial Organization, Elsevier, vol. 9(4), pages 573-583, December.
  13. Jota Ishikawa & Yoichi Sugita, 2004. "Commercial policy under cross-border ownership," Econometric Society 2004 Far Eastern Meetings 663, Econometric Society.
  14. Ishikawa, Jota, 1998. "Who Benefits from Voluntary Export Restraints?," Review of International Economics, Wiley Blackwell, vol. 6(1), pages 129-41, February.
  15. Markusen, James R. & Venables, Anthony J., 1999. "Foreign direct investment as a catalyst for industrial development," European Economic Review, Elsevier, vol. 43(2), pages 335-356, February.
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