The Paper develops a model with lumpy setup costs of new investment, which govern the flows of FDI. Foreign investment decisions are two-fold: whether to export FDI and, if so, how much. The first decision is governed by total profitability considerations, whereas the second is governed by...

Skilled migrants typically contribute to the welfare state more than they draw in benefits from it. The opposite holds for unskilled migrants. This suggests that a host country is likely to boost (respectively, curtail) its welfare system when absorbing high-skill (respectively, low-skill)...

Foreign direct investment (FDI) is observed to be a predominant form of capital flows to low- and middle-income countries with insufficiently developed capital markets. This paper analyses the problem of channelling domestic savings into productive investment, in the presence of asymmetric...

Like any trade activity, migration tends to generate gains to all parties involved - the migrants as well as the native-born population. With a mal-functioning labour market, however, migration will exacerbate the imperfections in the market. Consequently, it may lead to losses to the...

We develop a dynamic politico-economic theory of welfare state, featuring three groups of voters: skilled workers, unskilled workers, and old retirees. The welfare-state is modeled by a proportional tax on labor income to finance a demogrant in a balanced-budget manner to capture the essence of...

We develop a dynamic political-economic theory of welfare state and immigration policies, featuring three distinct voting groups: skilled workers, unskilled workers, and old retirees. The essence of inter - and intra-generational redistribution of a typical welfare system is captured with a...

We study the role of productivity and corporate taxation as driving forces of FDI among OECD countries in the presence of threshold barriers, which generate two margins for FDI decisions. Some simulations, based on the estimation results, suggest that there are marked differences in the...

In the presence of lumpy adjustment costs of investment, globalization may have non-conventional effects on the level of investment and its cyclical behaviour. Free trade may lead to a discrete ‘jump’ in the level of investment, as it triggers discrete terms-of-trade changes which either...

We develop a stylized EU-type model of a union consisting of rich, capital-abundant and productive, countries, and poor,capital-scarce and low productivity, countries, in order to explain key features of tax policies and inter- and intra-migration flows. Our purpose is to explain the differences...

Over the years, there emerged two key policy differences between Europe and America, both welfare and migration-states. The former has more generous welfare state and more liberal migration policies than the latter. In this paper we attempt to provide a political-economy explanation for these...