HKUST Library Institutional Repository Banner

HKUST Institutional Repository >
Center for Economic Development  >
CED Working Papers >

Please use this identifier to cite or link to this item: http://hdl.handle.net/1783.1/1821
Title: Export, foreign direct investment and local content requirement
Authors: Qiu, Larry Dongxiao
Tao, Zhigang
Keywords: Export
FDI
Local content requirement
Tariff
Multinationals
Issue Date: Jun-1999
Series/Report no.: Working Papers ; 9910
Abstract: Local content requirement (LCR) is a popular government regulation on foreign direct investment (FDI). This paper investigates the design of optimal LCR policy. LCR affects multinationals' international strategies, namely FDI and export. We find that a less efficient or more vertically integrated firm is more likely to adopt the FDI strategy over the export strategy. By taking the endogeneity of a firm's international strategy into account, we characterize conditions under which the host government's optimal LCR policy results in one of the following equilibria: (i) all firms make FDI, (ii) all firms choose export, and (iii) some make FDI and others choose export.
URI: http://hdl.handle.net/1783.1/1821
Appears in Collections:CED Working Papers

Files in This Item:

File Description SizeFormat
lcr.pdf269KbAdobe PDFView/Open

All items in this Repository are protected by copyright, with all rights reserved.