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...

Foreign investment in developing countries and in economies in transition may be discouraged by fluctuations in the value of local currencies, particularly when risk sharing markets, such as currency future markets are missing. International joint ventures can be regarded as an institution for...

We bring in hierarchical education and skill formation within a standard Jonesian specific-factor model of production and trade for a developing economy. There are three types of labor, unskilled, medium skilled and high-skilled. The unskilled can only develop into medium-skilled and...

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...

We argue, in a model with trade and unemployment, that exogenous inflow of foreign capital may deliver the desired result when it flows to a protected intermediate-goods sector. Whether foreign investment should be directed towards an intermediate-goods sector or to a final-goods sector depends...

This paper examines the optimal trade and hedging decisions of a competitive exporting firm which faces concurrently hedgeable exchange rate risk and non-hedgeable inflation risk. The macroeconomic interaction between exchange rate and domestic inflation rate risk is described by a state...