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Domestic Equity Controls of Multinational Enterprises
Author(s) -
Chao ChiChur,
Yu Eden S. H.
Publication year - 2000
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00196
Subject(s) - multinational corporation , economics , welfare , equity (law) , general equilibrium theory , short run , equity capital markets , monetary economics , microeconomics , labour economics , market economy , finance , political science , valuation (finance) , law
We use a general equilibrium model to examine the welfare effect of domestic equity requirements on multinational firms in the presence of alternative types of trade instruments and varying degrees of the mobility of foreign capital. It turns out that, under quotas, raising equity requirements improves welfare in the short run but reduces welfare in the long run. In contrast, when tariffs are in place, the policy of domestic equity requirements lowers welfare in the short run but raises welfare in the long run.