Does Globalization Foster Economic Growth?

This article examines the effects of globalization, by especially focusing on the relaxation of local equity requirements ( LER s) in developing countries. By constructing an endogenous growth model, where profit leakage to the S outh through LER s plays a key role, we obtain the following results. First, the relaxation of LER s in the S outh drives the relocation of firms from the N orth to the S outh, yielding a U ‐shaped growth rate. Second, our numerical simulations suggest that a sufficient relaxation of LER s is beneficial for the S outh, although the shared profit of joint ventures is maximized through the use of LER s.