This paper investigates the effects of different degrees of wage setting centralisation on (1) the incentive of a MNE to locate in a host country, (2) the optimal level of investment it decides to commit to its foreign operation, and (3) the host country's welfare. Decentralised and centralised...

We construct a model in which oligopolistic firms decide where to locate. Firms choose to locate either in a country where employment protection implies costly output adjustments or in one without adjustment costs. Using a two-period three-stage game with uncertainty it is demonstrated that...

In this paper we examine optimal strategic trade policy under oligopoly with many home and foreign firms when the firms have different levels of efficiency. The first-best policy involves a structure of firm-specific export subsidies and export taxes in which the government favours the most...

This paper examines the rationale for multilateral agreements to limit investment subsidies. The welfare ranking of symmetric multilateral subsidy games is shown to depend on whether or not investment levels are "friendly", raising rival profits in total, and/or strategic complements, raising...

We examine optimal industrial and trade policies in a series of dynamic oligopoly games in which a home and a foreign firm compete in R&D and output. Alternative assumptions about the timing of moves and the ability of agents to commit intertemporally are considered. We show that the home export...

We characterize optimal trade and industrial policy in dynamic oligopolistic markets. If governments can commit to future policies, optimal first-period intervention should diverge from the profit-shifting benchmark to an extent which exactly offsets the strategic behaviour implied by Fudenberg...

Empirical evidence strongly suggests that R&D increases a firm’s ‘absorptive capacity’ (its ability to absorb spillovers from other firms) as well as contributing directly to profitability. We explore the theoretical implications of this. We specify a general model of the absorptive...

This paper examines the free-market and socially-optimal outcomes in a dynamic oligopoly model with R&D spillovers. First-best optimal subsidies to R&D are higher when firms play strategically against each other, but lower when they cooperate on R&D (at least with high spillovers) and when they...

We introduce the concept of cooperative substitutes and complements, and use it to throw light on the conditions for a research joint venture to choose equal levels of R&D by all member firms. We show that the second-order conditions for a symmetric optimum take a particularly simple form,...

This paper investigates how the mode of entry into a foreign market can be influenced by the intensity of R&D in an industry and the protection of intellectual property rights (IPR) in a recipient country. It then analyzes the link between the IPR regime and policies that place limits on the...