IDEAS home Printed from https://ideas.repec.org/a/bla/reviec/v15y2007i2p294-301.html
   My bibliography  Save this article

Welfare‐reducing Domestic Cost Reduction

Author

Listed:
  • Arijit Mukherjee
  • Uday Bhanu Sinha

Abstract

We show that cost reduction by a domestic firm may reduce domestic welfare if it changes a foreign firm’s production strategy from foreign direct investment to export. Domestic cost reduction can be welfare reducing when the domestic market is sufficiently small and domestic firm’s marginal cost of production is higher than the foreign firm’s marginal cost of production under foreign direct investment, which is a usual feature of trade between developed and developing countries. So, developing countries with small domestic markets need competent competition policies when encouraging domestic innovation and also trying to attract foreign direct investment.

Suggested Citation

  • Arijit Mukherjee & Uday Bhanu Sinha, 2007. "Welfare‐reducing Domestic Cost Reduction," Review of International Economics, Wiley Blackwell, vol. 15(2), pages 294-301, May.
    • Handle: RePEc:bla:reviec:v:15:y:2007:i:2:p:294-301
    DOI: 10.1111/j.1467-9396.2006.00635.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-9396.2006.00635.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-9396.2006.00635.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ya‐Po Yang & Ying‐Yi Tsai & Su‐Ying Hsu, 2021. "Technology licensing, entry mode, and trade liberalization," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 834-853, May.
    2. Maiti, Dibyendu & Mukherjee, Arijit, 2013. "Governance, foreign direct investment and domestic welfare," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 406-415.
    3. Arijit Mukherjee & Kullapat Suetrong, 2013. "Privatization, Incentive Delegation and Foreign Direct Investment," Open Economies Review, Springer, vol. 24(4), pages 657-676, September.
    4. Mukherjee, Arijit & Suetrong, Kullapat, 2009. "Privatization, strategic foreign direct investment and host-country welfare," European Economic Review, Elsevier, vol. 53(7), pages 775-785, October.
    5. Yibai Yang, 2015. "Domestic R&D, Foreign Direct Investment and Welfare," Review of Development Economics, Wiley Blackwell, vol. 19(4), pages 908-924, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:reviec:v:15:y:2007:i:2:p:294-301. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.