This paper studies why multinational firms often share ownership of a foreign affiliate with a local partner even in the absence of government restrictions on ownership. We show that shared ownership may arise, if (i) the partner owns assets that are potentially important for the investment...

This paper examines how trade liberalization affects the innovation incentives of firms, and what this implies for industry productivity and social welfare. For this purpose we develop a reciprocal dumping model of international trade with heterogeneous firms and endogenous R&D. We identify two...

This paper develops an efficiency theory of contingent trade policies. We model the competition for a domestic market between one domestic and one foreign firm as a pricing game under incomplete information about production costs. The cost distributions are asymmetric because the foreign firm...

This paper discusses environmental policies in response to foreign direct investment (FDI) in a symmetrie two-country setting, where firms' behavior affects government policy decisions. We show that two alternative equilibria with FDI are possible: (i) one with unilateral FDI, where one firm is...

This paper investigates the implications for international markets of the existence of retailers/wholesalers with market power. Two main results are shown. First, in the presence of buyer power trade liberalization may lead to retail market concentration. Due to this concentration retail prices...

We examine the effect of exchange-rate misalignments on competition in the market for large commercial aircraft. This market is a duopoly where players compete in dollar-denominated prices while one of them, Airbus, incurs costs mostly in euros. We construct and calibrate a simulation model to...

We use unique plant-level data to study the link between the local availability of services and the decision of manufacturing firms to source materials from abroad. To guide our empirical analysis we develop a monopolitic-competition model of the materials sourcing decisions of heterogeneous...

We develop a general-equilibrium model to capture key features of the retailing and of the manufacturing industry in order to understand how these two industries interact and how labor is allocated between them. We show that the observed shift in employment from manufacturing to retailing, the...

This paper argues that the large reduction in corporate tax rates and only gradual widening of tax bases in many countries over the last decades are consistent with tougher international competition for foreign direct investment (FDI). To make this point we develop a model in which governments...