On the FDI-Attracting Property of Privatization

Oscar Amerighi, Giuseppe De Feo

Research output: Working paperDiscussion paper

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.
LanguageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-26
Number of pages28
Volume10
Publication statusPublished - Feb 2010

Fingerprint

Privatization
Foreign firms
Public firm
Substitute
Social welfare
Government
Competitors
Profit
Tax subsidies
Foreign investors

Keywords

  • foreign direct investment
  • privatization
  • policy competition

Cite this

Amerighi, O., & De Feo, G. (2010). On the FDI-Attracting Property of Privatization. (07 ed.) (pp. 1-26). Glasgow: University of Strathclyde.
Amerighi, Oscar ; De Feo, Giuseppe. / On the FDI-Attracting Property of Privatization. 07. ed. Glasgow : University of Strathclyde, 2010. pp. 1-26
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Amerighi, O & De Feo, G 2010 'On the FDI-Attracting Property of Privatization' 07 edn, University of Strathclyde, Glasgow, pp. 1-26.

On the FDI-Attracting Property of Privatization. / Amerighi, Oscar; De Feo, Giuseppe.

07. ed. Glasgow : University of Strathclyde, 2010. p. 1-26.

Research output: Working paperDiscussion paper

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Amerighi O, De Feo G. On the FDI-Attracting Property of Privatization. 07 ed. Glasgow: University of Strathclyde. 2010 Feb, p. 1-26.