On generating efficiency through public-private joint ventures

Udo Broll and Sugata Marjit

No 183, Discussion Papers, Series II from University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy"

Abstract: International joint ventures (JV) are popular institutional forms chosen by the less developed countries (LDCs) to attract foreign Investments. In this paper we describe a set up where a multinational firm (MNF) decides on the volume of investment and the LDC gov-ernment offers a package specifying taxes and sharing rules by a JV contract. Such sharing rules can be designed to enhance the level of optimal investment under the presence of distortions and asymmetric information. We also provide an example where a JV contract might not work. In general, JV contracts lead to efficient outcomes.

Date: 1992
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