It is often argued that multinationals are reluctant to transfer technology due to the fear of spillovers. We show that this need not be the case if host country policies like taxation are taken into account. Furthermore, we examine the incentives the multinational and the host country have to...

The crisis on international financial markets that started in 2007 has shown the potential links between the financial sector and the real economy. Exports and foreign direct investment (FDI) have declined, presumably not only because of a lack of demand, but also because of restricted access of...

Does the mere presence of big banks affect macroeconomic outcomes? Gabaix (2011) shows that idosyncratic shocks can have aggregate effects if the distribution of firm sizes in manufacturing follows a power law distribution. Our contribution is two-fold. First, we expand the theory of granularity...

We develop a model of successive oligopolies with endogenous entry, allowing for varying degrees of product differentiation and entry costs in both markets. We show that downstream conditions dominate the overall profitability of the two-tier structure while upstream conditions mainly affect the...

This paper investigates how multinational firms choose the capital structure of their foreign affiliates in response to political risk. We focus on two choice variables, the leverage and the ownership structure of the foreign affiliate, and we distinguish different types of political risk, such...

The privatization process in Eastern Europe has not been a success everywhere. The opinion or experts about the optimal privatization strategy has changed over the last decade. This article first presents the theoretical foundation for privatizing state-owned enterprises. It then discusses the...

We investigate how bank competition affects the efficiency of credit allocation, using a model of spatial competition. Our analysis shows that bad loans are more likely the larger the number of banks competing for customers. We study further how many banks will be active if market entry is not...

This paper studies the strategic interaction between a foreign direct investor and a host country. We analyze how the investor can use his control rights to protect his investment if he faces the risk of \"creeping expropriation\" once his investment is sunk. It is shown that this hold-up...

Previous empirical work on the link between domestic and foreigninvestment has provided mixed results. This may partly be due to thelevel of aggregation of the data. In this paper, we argue that theimpact of FDI on the domestic capital stock depends on the structure ofindustries. Using...