Competition, foreign direct investment and welfare

Mukherjee, Arijit; Sinha, Uday Bhanu

Abstract

In contrast to the usual belief, we show that a lower product-market competition may make the consumers better off and increase welfare when foreign firms strategically choose between export and foreign direct investment (FDI). A lower product-market competition may increase consumer surplus and welfare by inducing FDI. The higher welfare stems from the increased production efficiency under FDI compared to export by the foreign firm.

Citation

Mukherjee, A., & Sinha, U. B. (2016). Competition, foreign direct investment and welfare. Economics Letters, 139, https://doi.org/10.1016/j.econlet.2015.12.013

• Journal Article Type: Article
• Acceptance Date: Dec 13, 2015
• Online Publication Date: Dec 24, 2015
• Publication Date: Feb 1, 2016
• Deposit Date: Feb 10, 2016
• Publicly Available Date: Feb 10, 2016
• Journal: Economics Letters
• Print ISSN: 0165-1765
• Electronic ISSN: 0165-1765
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 139
• DOI: https://doi.org/10.1016/j.econlet.2015.12.013
• Public URL: https://nottingham-repository.worktribe.com/output/770902
• Publisher URL: http://www.sciencedirect.com/science/article/pii/S0165176515005224