We analyze local content requirement (LCR) and tariff in a two-country model of vertical market-structure with endogenous foreign direct investment (FDI). The foreign firm chooses whether to export or to undertake FDI. The host country anticipates the potential for FDI and selects tariff with or...

Mezzeti and Dinopoulos (1991) show that a free trade agreement (trade liberalization) decreases wage rate. However, Naylor (1998) shows that trade liberalization increases wage rate. Both papers consider tariff as exogenously given. In this paper we show that these conflicting results can be...

This paper presents a formal model of tunneling and propping in a pyramidal ownership structure. Tunneling refers to controlling shareholders shifting funds from one firm to another in the same pyramid. Propping is tunneling that is done to save the receiving firm from bankruptcy. We compare the...