Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92855
Authors: 
Creane, Anthony
Miyagiwa, Kaz
Year of Publication: 
2009
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 741
Abstract: 
Foreign direct investment (FDI) gives foreign firms access to local labor and inputs, thereby harmonizing costs between foreign and domestic firms relative to exports. This paper investigates the welfare effects of such cost harmonization in strategic environments, finding that when the number of home firms is sufficiently close to the number of foreign firms, FDI reduces home welfare, whether FDI raises or decreases foreign firms' marginal costs. An implication is that under the same conditions, a country is harmed by tax harmonization on products that bring foreign taxes on product it imports inline with domestic ones for products.
Subjects: 
foreign investment
Cournot competition
welfare
JEL: 
F12
F21
Document Type: 
Working Paper

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