This paper extends Symeonidis (2003)’s duopoly model with product differentiation to discusses how FDI spillovers that decreases the quality difference between vertically differentiated products of the home and foreign firms affects the home firm’s decision on plant location. This paper shows that whether the degree of spillover is exogenous or endogenous, it may have a positive relationship wi...

The aim of this paper is to study both the private and the social desirability of a mixed bundling strategy that generates a cost savings effect. We confirm that mixed bundling is the dominant strategy for multiproduct firms, although it may give rise to a prisoner’s dilemma. Moreover, we show that mixed bundling may maximise social welfare, provided that cost savings are sufficiently high. Fin...

This paper examines the effects of exchange rates on R&D activities and international strategy choices of the oligopolies. We develop a three-stage game-theoretic model in which two firms located in two different countries (a developing and a developed one) choose the mode of foreign expansion in the first stage. They decide how much to spend on R&D, and how much to sell in domestic and foreign...

This paper reviews the recent theoretical literature that analyses the European Union’s policy to eliminate preferential corporate tax regimes and the proposal to introduce a consolidated EU tax base with formula apportionment for the taxation of multinational firms. Since neither proposal includes a harmonisation of corporate tax rates, a core issue is how tax competition between member states...

In this paper, we examine the welfare properties of strategic fragmentation under production subsidies. We first consider a case in which a production subsidy rate is given exogenously. We show that, under the fixed subsidy policy, firms choose fragmentation despite the domestic production being socially desirable. Next, we examine a situation in which the government chooses a production subsid...

We consider whether pollution-intensive FDI tends to outflow from a country which maintains stringent environmental regulations and into countries with weak environmental regulations. We consider this issue by incorporating the predictions from the recent heterogeneous firm models of international trade into an empirical model of outward FDI by UK firms. We find that environmental regulations a...

In this paper we examine the interaction between the different modes of market access commitments in services (cross-border and establishment) market structure, and regulation. In this context, we focus on the impact of improved domestic market access for a foreign service provider on a domestic service market. We work with a model where the domestic industry is assumed to be imperfectly compet...

Multinational Companies, Backward Linkages and Labour Demand Elasticities This paper investigates the link between nationality of ownership and wage elasticities of labour demand at the level of the plant. In particular, we examine whether labour demand in multinationals becomes less elastic with respect to the wage if the plant has backward linkages with the local economy. Our empirical eviden...

How is economic policy made? In this paper we study a key determinant of the answer to the question: lobbying by firms. Estimating a binary choice model of firm behavior, we find significant evidence for the idea that barriers to entry induce persistence in lobbying. The existence of these costs is further confirmed in studying how firms responded to a particular policy change: the expiration o...

This paper examines how an industry’s productivity is changed by inward FDI occurring in affiliated downstream industries those buying from the focal industry. While controlling for FDI into the focal industry, I find that FDI in downstream industries has a significant negative influence on U.S. manufacturing industries in 1987-1991. Downstream FDI reduces productivity by lowering the demand fo...