Vertical foreign direct investment: Make, buy, and sell

2020 ◽  
Vol 28 (3) ◽  
pp. 884-912
Author(s):  
Chrysovalantou Milliou ◽  
Joel Sandonis
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Vertical Foreign Direct Investment

scholarly journals Vertical Foreign Direct Investment, Welfare, and Employment

2005 ◽  
Vol 5 (1) ◽  
Author(s):  
Walter Elberfeld ◽  
Georg Götz ◽  
Frank Stähler
Keyword(s):  
Foreign Direct Investment ◽  
Imperfect Competition ◽  
Direct Investment ◽  
Market Entry ◽  
Multinational Firms ◽  
Free Market ◽  
Labor Demand ◽  
First Case ◽  
Vertical Foreign Direct Investment ◽  
Number Of Firms

AbstractThis paper shows that vertical foreign direct investment will reduce prices but the aggregate welfare effect is unambiguously positive only under free market entry. Using a standard model of imperfect competition, we develop this result by considering two different cases. In the first case, the total number of firms is fixed, and we show that national and multinational firms may coexist. In the second case, we allow for market entry, and we focus on situations in which either only national or only multinational firms are active. Furthermore, we discuss impact effects on labor demand. We show that a decline in foreign wages increases domestic employment.

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