The Welfare Effects of Attracting Foreign Direct Investment in the Presence of Unemployment

23 Pages Posted: 3 Mar 2016

See all articles by Yoshitomo Ogawa

Yoshitomo Ogawa

Kinki University

Yoshiyasu Ono

Osaka University - Institute of Social and Economic Research (ISER)

Date Written: February 23, 2016

Abstract

We develop a 2×2×2 model with the following features: (1) one sector is perfectly competitive while the other is oligopolistic; (2) one country has unemployment while the other attains full employment; (3) oligopolists move internationally; and (4) the ownership of each oligopolist is internationally shared. The welfare effects of various tax-cum-subsidies are examined. If the oligopolistic sector is capital intensive, subsidizing the oligopolists' profits, inflows, production or employment is more likely to harm the country. The number of domestically based oligopolists, the volume of domestic demand for the oligopoly-produced commodity, and the country's ownership share of oligopolists also influence the effect.

Keywords: Corporate Taxation, Production Subsidies, Unemployment, Oligopoly

JEL Classification: F12, F13, H25, H71, R38

Suggested Citation

Ogawa, Yoshitomo and Ono, Yoshiyasu, The Welfare Effects of Attracting Foreign Direct Investment in the Presence of Unemployment (February 23, 2016). ISER Discussion Paper No. 959. Available at SSRN: https://ssrn.com/abstract=2740863 or http://dx.doi.org/10.2139/ssrn.2740863

Yoshitomo Ogawa

Kinki University ( email )

Higashi-Osaka City, Osaka 577-8502
Japan

Yoshiyasu Ono (Contact Author)

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

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