Export-Oriented Foreign Direct Investment and Local Content Requirement

14 Pages Posted: 15 Aug 2003

See all articles by Sajal Lahiri

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics

Yoshiyasu Ono

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

Abstract

We develop a model in which foreign firms locate in a host country and export their produce to another (consuming) country. We consider both exogenous and endogenous numbers of foreign firms. These firms compete with domestic firms in the consuming country under oligopoly. Unemployment exists in both countries. We analyse the conflict of interest between the two countries on the level of local content for the foreign firms. Under free entry of foreign firms, the consuming country may want a less severe restriction on local contents than the host country, but not so when the number of foreign firms is exogenous.

Suggested Citation

Lahiri, Sajal and Ono, Yoshiyasu, Export-Oriented Foreign Direct Investment and Local Content Requirement. Pacific Economic Review, Vol. 8, pp. 1-14, January 2003. Available at SSRN: https://ssrn.com/abstract=416820

Sajal Lahiri (Contact Author)

Southern Illinois University Carbondale - Department of Economics ( email )

MC 415
1000 Faner Drive
Carbondale, IL 62901
United States

Yoshiyasu Ono

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

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

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