Competition, foreign direct investment and welfare
Mukherjee, Arijit and Sinha, Uday Bhanu (2016) Competition, foreign direct investment and welfare. Economics Letters, 139 . pp. 43-45. ISSN 0165-1765
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.
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