Incentive Regulation of Multinational Enterprises

Giacomo Calzolari ()

International Economic Review, 2004, vol. 45, issue 1, 257-282

Abstract: Sectors with a long regulatory tradition have recently experienced intense activity by multinationals whose international operations and relocation threats represent a new cause for concern for regulators. I analyze a multinational serving two countries and being regulated by two national authorities. The firm is shown to favor, or cross-subsidize, the country with a larger stake in the firm's profit, and the linkage among national regulations may induce unexpected effects on outputs. I also analyze a multinational's lobbying decisions and its effects on national regulations. Finally, a credible threat to "fly" away from tough regulators lets the firm obtain larger profits. Copyright 2004 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Date: 2004
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