Foreign Direct Investment and the Single Market

Foreign Direct Investment and the Single Market*

Market Entry and Foreign Direct Investment

This paper discusses the impact of foreign direct investment (FDI) on market entry and welfare. It assumes that firms may enter markets in the first period as national firms only. In the second period, however, FDI is possible. The paper demonstrates that FDI reduces market entry because equilibrium profits in the second period decline with a decrease in the fixed cost of FDI. Therefore, compar...

The Country Risks and Foreign Direct Investment (FDI)

T he importance of foreign direct investment (FDI) in developing countries has begun to spread very rapidly, especially after the transition of command economies countries into open markets. Many countries see attracting FDI as an important element in their strategy for economic growth because FDI is widely regarded as an amalgamation of capital, technology, marketing, and management...

Income Distribution, Market Size, and Foreign Direct Investment∗

This paper studies the role of the host country’s market size in the determination of foreign direct investment (FDI) and trade flows in a general equilibrium model. We propose a simple model with non-homothetic consumer behavior where the distribution of income in the host country implies market segmentation. Facing a proximity-concentration trade-off, in equilibrium ex-ante identical firms ch...

Foreign Direct Investment and the Multinational Enterprise