Asymmetric oligopoly and foreign direct investment: implications for host-country tax-setting

We present a duopoly model with heterogeneous firms that vary in cost-efficiency, each of which can choose to serve a foreign market by either exporting or local production. We do so to analyse the effects of a host-country corporate profit tax on both the scale and composition of FDI, and find that: strategic interaction between oligopolistic firms provides for a pattern of FDI that favours cost-inefficiency to the detriment of host-country welfare; and the host-country tax rate can be optimally used to avoid such patterns of FDI and instead promote direct investment by a relatively cost-efficient firm.

A new framework for understanding inequalities between expatriates and host country nationals

An interdisciplinary theoretical framework is proposed for analysing justice in global working conditions. In addition to gender and race as popular criteria to identify disadvantaged groups in organizations, in multinational corporations (MNCs) local employees (i.e. host country nationals (HCNs) working in foreign subsidiaries) deserve special attention. Their working conditions are often substantially worse than those of expatriates (i.e. parent country nationals temporarily assigned to a foreign subsidiary). Although a number of reasons have been put forward to justify such inequalities—usually with efficiency goals in mind—recent studies have used equity theory to question the extent to which they are perceived as fair by HCNs. However, since perceptual equity theory has limitations, this study develops an alternative and non-perceptual framework for analysing such inequalities. Employment discrimination theory and elements of Rawls’s ‘Theory of Justice’ are the theoretical pillars of this framework. This article discusses the advantages of this approach for MNCs and identifies some expatriation practices that are fair according to our non-perceptual justice standards, whilst also reasonably (if not highly) efficient.

'A hideously difficult country': British propaganda to France in the early Cold War

This article examines British propaganda efforts in the early Cold War in the light of a developing relationship in which the senders' own strategies were to be modified and challenged.The article argues that initiatives to broadcast propaganda from Britain into France via the BBC operated within a broader and developing information policy context. Broadcasting from outside the country through the BBC was supplemented with attempts by British personnel stationed in France to embed positive messages directly within the contemporary French media. By 1950 however, the Britsih propaganda initiative seemed inappropriate and outmoded, taken over by the French themselves and by a British desire to prioritise countries outside Western Europe.

Cross-country effects of regulatory capital arbitrage

One reason for the recent asset price bubbles in many developed countries could be regulatory capital arbitrage. Regulatory and legal changes can help traditional banks to move their assets off their balance sheets into the lightly regulated shadows and thus enable regulatory arbitrage through the securitized sector. This paper adopts a global vector autoregression (GVAR) methodology to assess the effects of regulatory capital arbitrage on equity prices, house prices and economic activity across 11 OECD countries/ regions. A counterfactual experiment disentangles the effects of regulatory arbitrage following a change in the net capital rule for investment banks in April 2004 and the adoption of the Basel II Accord in June 2004. The results provide evidence for the existence of an international finance multiplier, with about half of the countries overshooting U.S. impulse responses. The counterfactual shows that regulatory arbitrage via the U.S. securitized sector may enhance the cross-country reallocation of capital from housing markets towards equity markets.

Liability of country foreignness and liability of regional foreignness: their effects on geographic diversification and firm performance

The costs of inter- and intra-regional diversification have been widely discussed in the existing international business literature, but the findings are mixed. Explanations for the mixed findings have important managerial implications, because business managers have to estimate accurately the costs of doing business within and across regions before they make their internationalization decisions. To explain the existing mixed findings, this study differentiates between liabilities of foreignness at the country and regional levels, and explores the joint effects of liability of country foreignness (LCF) and liability of regional foreignness (LRF) on the performance of internationalizing firms. Using data from 167 Canadian firms, we find that LCF may not necessarily be negatively correlated with intra-regional diversification, but LRF is positively correlated with inter-regional diversification. LCF moderates the relationship between LRF and inter-regional diversification, and also mediates the relationship between intra-regional diversification and firm performance. LRF mediates the relationship between inter-regional diversification and firm performance. Missing one or more of these variables may result in different cost estimates. Identification of the relationships between these variables helps to improve the accuracy of estimating the costs of doing business aboard.

Public real estate and the term structure of interest rates: a cross-country study

Using a variation of the Nelson-Siegel term structure model we examine the sensitivity of real estate securities in six key global markets to unexpected changes in the level, slop and curvature of the yield curve. Our results confirm the time-sensitive nature of the exposure and sensitivity to interest rates and highlight the importance of considering the entire term structure of interest rates. One issue that is of particular of interest is that despite the 2007-9 financial crisis the importance of unanticipated interest rate risk weakens post 2003. Although the analysis does examine a range of markets the empirical analysis is unable to provide definitive evidence as to whether REIT and property-company markets display heightened or reduced exposure.

Within - versus between - country differences in risk attitudes: implications for cultural comparisons

Cultural comparisons enjoy increasing popularity in economics. Since cultural comparison must abandon random allocation to treatments, it is unclear whether differences found between countries can be attributed to country characteristics or are merely driven by differences in subject pools. In experiments in two Chinese cities and at two campuses in Ethiopia, we show that within-country differences are negligible. Differences between the two countries, on the other hand, are large.