Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/46851
Authors: 
De Santis, Roberto A.
Stähler, Frank
Year of Publication: 
1999
Series/Report no.: 
Kiel Working Paper 958
Abstract: 
This paper discusses the gains from foreign direct investment (FDI) in a two country setting with endogenous markets structures under two alternative locations for the oligopolistic industry. If the oligopolistic industry is located in the domestic country only, we show that market concentration occurs if national and multinational firms coexist. In this case, FDI is welfare improving for the foreign country, but welfare declining for the domestic country. If only multinational firms are competitive, the impact on market structure and the welfare of the domestic country is indeterminate, whereas the welfare of the foreign country improves. By contrast, if the oligopolistic industry is located in both countries, then FDI compared to intraindustry trade leads to mutual welfare gains.
Subjects: 
Foreign direct investment
Multinational enterprises
Imperfect competition
Welfare
JEL: 
F12
F15
Document Type: 
Working Paper

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