Plant Locations with Reimport in the Presence of Unemployment

摘要: In this paper, we develop a location model of multi-national firms (MNFs) and examine the impact of FDI on the social welfare of FDI source country. We also investigate whether or not the MNFs’ location shift by the private incentives based on profit maximization is consistent with social optimum, especially when the unemployment in the domestic country is considered. The main results are as follows. In the absence of plant-specific fixed costs, the MNFs choose an identical location, and the regime shift occurs at the critical level which is equalized the effective marginal costs between countries. The shift without considering the unemployment is consistent with the social optimum. Taking into consideration the unemployment problem, however, the shift occurs at the lower level in trade liberalization than the level that is determined by the social welfare viewpoint. On the other hands, in the presence of plant-specific …