Competition, foreign direct investment and welfare

Arijit Mukherjee and Uday Sinha

Economics Letters, 2016, vol. 139, issue C, 43-45

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.

Keywords: Competition; Consumer surplus; Foreign direct investment; Welfare (search for similar items in EconPapers)
JEL-codes: F21 F23 L13 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:139:y:2016:i:c:p:43-45

DOI: 10.1016/j.econlet.2015.12.013

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