Foreign Entry Deterrence by the Dominant Local Firm in the Existence of a Rent-Seeking Bureaucracy
نویسنده
چکیده
In this paper the authors examine the relationship between local corruption and multinational investment. They construct a model of regulatory capture that highlights the interaction between a corrupt regulator, a local dominant rm and a multinational rm. The model suggests that entry by a multinational could have a variety of e¤ects on corruption, both positive and negative. These include: decreasing corruption and regulatory distortion by reducing available rents and diluting incentives for paying bribes; increasing corruption and regulatory distortion by creating competition for regulatory bias; and increasing corruption while reducing distortion through dissipative competition for the regulator. JEL Classi cation: F23; K4; R38
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