Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/32004 
Year of Publication: 
2001
Series/Report no.: 
cege Discussion Papers No. 11
Publisher: 
University of Göttingen, Center for European, Governance and Economic Development Research (cege), Göttingen
Abstract: 
Although many countries welcome inward investments by multinational firms (MNEs), it is often perceived that MNEs readily close down production in bad times. We study the choice of an MNE in deciding whether to establish a branch plant within a region, explicitly taking into account exit, as well as entry, costs. Protecting workers by having strict lay-off rules deters potential investment while subsidies attract it. We examine the policy trade-off for a host government and investigate how uncertainty affects the attractiveness of investment in a particular location. Just how much does the ease of exit influence the entry decision?
Subjects: 
multinational firms
subsidies
entry
exit
uncertainty
JEL: 
D92
F12
F23
Document Type: 
Working Paper

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