This paper examines the choice among alternative modes of direct foreign investment, namely, the wholly owned subsidiary (the S option) and joint venture (the J option), vis-a-vis licensing (the L option). The focus is on the role of moral hazard, difference in risk attitude and the prospect of...

The paper presents a model of optimal government policy when policy choices may exacerbate sociopolitical instability (SPI). The authors show that optimal policy that takes into account SPI transforms a standard concave growth model into a model with both a poverty trap and endogenous growth....