Template-Type: ReDIF-Paper 1.0
Author-Name: Oscar  Amerigi
Author-Name-First: Oscar 
Author-Name-Last: Amerigi
Author-Email: oscar.amerighi@unibo.it
Author-Workplace-Name: Dipartimento di Scienze Economiche, Universita di Bologna
Author-Name: Giuseppe  De Feo
Author-Name-First: Giuseppe 
Author-Name-Last: De Feo
Author-Email: giuseppe.defeo@strath.ac.uk
Author-Workplace-Name: Department of Economics, University of Strathclyde
Title: On the FDI-atrracting property of privatization.
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.
Length: 28 pages
Creation-Date: 2010-03
Revision-Date: 
Publication-Status: 
File-URL: http://www.strath.ac.uk/media/1newwebsite/departmentsubject/economics/research/researchdiscussionpapers/2010/10-07_final.pdf
File-Format: Application/pdf
Number: 1007
Classification-JEL: F23; H73; L33
Keywords: Foreign Direct Investment; Privatization; Policy Competition
Handle: RePEc:str:wpaper:1007