Globalization & Deregulation in MENA Countries.

This paper develops a theoretical model of direct foreign investment to analyze the changing role of regulatory policies in developing countries in the presence of globalization. The main result is that deregulation is an optimal responde to globalization, at least in countries that face a FDI constraint due to credibility problems. The model focuses on the hazards that increased regulations generate for foreign investors as the government gains additional instruments to appropriate the surpluses and quasi-rents of foreign direct investment (FDI) projects.