On the FDI-Attracting Property of Privatization

Oscar Amerighi, Giuseppe De Feo

Research output: Working paperDiscussion paper

6 Downloads (Pure)

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 profit-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 the two objectives of governments.
Original languageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-26
Number of pages28
Volume10
Publication statusPublished - Feb 2010

Keywords

  • foreign direct investment
  • privatization
  • policy competition

Fingerprint Dive into the research topics of 'On the FDI-Attracting Property of Privatization'. Together they form a unique fingerprint.

  • Cite this

    Amerighi, O., & De Feo, G. (2010). On the FDI-Attracting Property of Privatization. (07 ed.) (pp. 1-26). University of Strathclyde.