Privatisation, strategic foreign direct investment and the host country welfare

Recent evidence shows that developing countries and transition economies are increasingly privatising their public firms and at the same time experiencing rapid growth of inward foreign direct investment (FDI). In an international mixed oligopoly, we analyse the interaction between privatisation and FDI. We show that privatisation increases the incentive for FDI, which in turn, increases the incentive for privatisation compared to the situation of no FDI. The optimal degree of privatisation depends on the cost difference between the public and the foreign firms, and on the foreign firm's mode of entry. We show that our results are robust with respect to the incentive contracts between the owners and the managers. The incentive for FDI and is higher under the incentive contract than under the no incentive contract, and the optimal degree of privatisation is almost always higher under the incentive contract than under the no incentive contract.Privatisation; FDI; Welfare; Incentive contract

Unionisation structure and strategic foreign direct investment

It is often argued that if the substitutability between workers is sufficiently high, labour is better off under a centralised labour union than under decentralised unions. We show that this may not be the case in an open economy with foreign direct investment as the incentive for outward FDI is higher under a centralised union than under decentralised unions. If the number of firms undertaking FDI under a centralised union is higher than under decentralised unions, their wage rates charged by the labour union and the union utility may be higher under decentralised unions than under a centralised union, and the comparison may depend on the competitiveness of the industry. We also show that there are situations where both the domestic industry and the labour unions prefer decentralised unions over a centralised union.Trade union; Wage bargaining; Union structure; FDI

Privatization, strategic foreign direct investment and host-country welfare

Recent evidence shows that developing countries and transition economies are increasingly privatizing their public firms and at the same time experiencing rapid growth of inward foreign direct investment (FDI). We show that there is a two-way causality between privatization and greenfield FDI. Privatization increases the incentive for FDI, which, in turn, increases the incentive for privatization compared to the situation of no FDI. The optimal degree of privatization depends on the cost difference of the firms, and on the foreign firm's mode of entry.Privatization Greenfield FDI Welfare

Privatization, strategic foreign direct investment and host-country welfare

Recent evidence shows that developing countries and transition economies are increasingly privatizing their public firms and at the same time experiencing rapid growth of inward foreign direct investment (FDI). We show that there is a two-way causality between privatization and greenfield FDI. Privatization increases the incentive for FDI, which, in turn, increases the incentive for privatization compared to the situation of no FDI. The optimal degree of privatization depends on the cost difference of the firms, and on the foreign firm's mode of entry