Migration of Firms, Home Bias and Economic Growth

Aharonovitz Gilad D ()
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Aharonovitz Gilad D: Washington State University

Global Economy Journal, 2011, vol. 11, issue 2, 30

Abstract: This study analyzes the effects of government policies on the short-run and long-run movement of locally owned firms from a developed country to a less-developed country and on the output and growth rate of each country in the presence of home bias, a preference of firms and investors to operate in their home countries. The analysis uses a model which was developed for this purpose, in which growth is stemming from the increase in the number of firms. The study finds that for the less-developed country, harsh policy towards entering firms, such as taxing them in the form of requiring firms to grant partial ownership to local agents, results in better long-run economic performance, compared to free entry or subsidizing these firms, in addition to the harsh policy being less costly.

Keywords: firms; ownership; economic growth; overtaking; home bias (search for similar items in EconPapers)
Date: 2011
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DOI: 10.2202/1524-5861.1639

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