The competitive allocation of labor across different sectors of an economy may not be socially optimal when one sector uses foreign capital. We argue that a suitably designed government intervention is required to restrict the sectors to their optimal size and maximize national welfare. Such a...

International joint ventures (JV) are popular institutional forms chosen by the less developed countries (LDCs) to attract foreign Investments. In this paper we describe a set up where a multinational firm (MNF) decides on the volume of investment and the LDC gov-ernment offers a package...

An increased foreign capital inflow into a protected sector is generally immiserizing. We show that if the protected sector produces an intermediate input, positive welfare effects may emerge. A striking result is that it might lead to an increased import-demand for the intermediate input which...

In this paper, unlike the conventional wisdom, we demonstrate that the relationship between the size of the market and number of firms would be non-monotonic. While moderate rise in the size would force the local firms to exit and only the foreign firm rules, substantial rise in the size would...