Imports, Domestic Production, and Transnational Vertical Integration: A Theoretical Note
Journal of Political Economy
1982
Suppose a developing country has the choice of importing cars (I), or producing them at home in a subsidiary (S) of a transnational company, or in a domestic firm under a licensing (L) contract from a transnational which ties the import of components from the latter. If the criterion of national benefit is given by consumer surplus under I or S and by consumer surplus plus the profits of the domestic firm under L, we compare the benefits from the alternative regimes I, S, or L under different market structure assumptions. In most cases the regime S seems to dominate. The conclusions are then modified by pointing to factors excluded from the basic model.
- DOI
- 10.1086/261106
- Volume
- 90 (5)
- Pages
- 1020-1034
- Language
- en
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