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Broll, Udo
Marjit, Sugata
Year of Publication: 
Series/Report no.: 
Diskussionsbeiträge - Serie II 183
International joint ventures (JV) are popular institutional forms chosen by the less developed countries (LDCs) to attract foreign Investments. In this paper we describe a set up where a multinational firm (MNF) decides on the volume of investment and the LDC gov-ernment offers a package specifying taxes and sharing rules by a JV contract. Such sharing rules can be designed to enhance the level of optimal investment under the presence of distortions and asymmetric information. We also provide an example where a JV contract might not work. In general, JV contracts lead to efficient outcomes.
Document Type: 
Working Paper

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