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Multinational firms: Easy come, easy go?

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  • Haaland, Jan Ingvald Meidell
  • Wooton, Ian

Abstract

Although many countries welcome inward investments by multinational firms (MNEs), it is often perceived that MNEs readily close down production in bad times. We study the choice of an MNE in deciding whether to establish a branch plant within a region, explicitly taking into account exit, as well as entry, costs. Protecting workers by having strict lay-off rules deters potential investment while subsidies attract it. We examine the policy trade-off for a host government and investigate how uncertainty affects the attractiveness of investment in a particular location. Just how much does the ease of exit influence the entry decision?

Suggested Citation

  • Haaland, Jan Ingvald Meidell & Wooton, Ian, 2001. "Multinational firms: Easy come, easy go?," University of Göttingen Working Papers in Economics 11, University of Goettingen, Department of Economics.
    • Handle: RePEc:zbw:cegedp:11
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    References listed on IDEAS

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    More about this item

    Keywords

    multinational firms; subsidies; entry; exit; uncertainty;
    All these keywords.

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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