On the FDI-atrracting property of privatization

Oscar Amerigi () and Giuseppe De Feo
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Oscar Amerigi: Dipartimento di Scienze Economiche, Universita di Bologna
Authors registered in the RePEc Author Service: Oscar Amerighi ()

No 1007, Working Papers from University of Strathclyde Business School, Department of Economics

Abstract: In this paper, we provide an explanation of why privatization may attract foreign investors willing to enter a regional market. Privatization turns the formerly-public firm into a less aggressive competitor since prot-maximizing output is lower than the welfaremaximizing one. The drawback is that social welfare generally decreases. We also investigate tax/subsidy competition for FDI and put forward its potentially positive role. On the one hand, it may reduce the negative impact on welfare of an FDI-attracting privatization. On the other hand, it may prevent a welfare-reducing investment by the foreign firm. This sheds light on the substitute/complementary relationship between the two policies and thetwo objectives of governments.

Keywords: Foreign Direct Investment; Privatization; Policy Competition (search for similar items in EconPapers)
JEL-codes: F23 H73 L33 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2010-03
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http://www.strath.ac.uk/media/1newwebsite/departme ... 2010/10-07_final.pdf (application/pdf)

Related works:
Working Paper: On the FDI-attracting property of privatizatio (2010)
Working Paper: On the FDI-Attracting Property of Privatization (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:str:wpaper:1007

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