FDI Selection: Crowding Out and Distributional Effects

OSU Working Paper No. 99-03

34 Pages Posted: 23 Jun 1999

See all articles by Amy Jocelyn Glass

Amy Jocelyn Glass

Texas A&M University - Department of Economics

Kamal Saggi

Southern Methodist University (SMU) - Department of Economics

Date Written: June 7, 1999

Abstract

Oligopolists from two source countries invest in a common host country to take advantage of low costs. A selective subsidy to multinational production encourages foreign direct investment (FDI) from the favored country but crowds out FDI from the other source. Such a subsidy also shifts rents across firms and alters wages. The source country with less natural tendency to conduct FDI in the host country receives the larger subsidy (or smaller tax). The source country receiving the smaller subsidy (or larger tax) loses relative to nonintervention but gains from a nondiscrimination clause requiring the host country to apply FDI policy equally across all firms.

JEL Classification: F12, F13, F23, L13

Suggested Citation

Glass, Amy Jocelyn and Saggi, Kamal, FDI Selection: Crowding Out and Distributional Effects (June 7, 1999). OSU Working Paper No. 99-03, Available at SSRN: https://ssrn.com/abstract=167489 or http://dx.doi.org/10.2139/ssrn.167489

Amy Jocelyn Glass (Contact Author)

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States
979-845-8507 (Phone)
979-847-8757 (Fax)

Kamal Saggi

Southern Methodist University (SMU) - Department of Economics ( email )

Dallas, TX 75275
United States
214-768-3274 (Phone)
214-768-1821 (Fax)

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