Driven by persistent scepticism about FDI, many countries adopt protectionist measures – regulatory restrictions being a key tool. This study argues that such restrictions hinder FDI, raising the key question: do FDI regulatory restrictions impede the flow of outward FDI (OFDI)? Building on Melitz-type heterogeneous firm models [Melitz, M. J. (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 71(6), 1695–1725; Helpman, E., Melitz, M. J., & Yeaple, S. R. (2004). Export versus FDI with heterogeneous firms. American economic review, 94(1), 300–316], the study examines how regulatory restriction influences Indian OFDI. Using firm-level bilateral data on Indian OFDI and the OECD's FDI regulatory restrictiveness index, the analysis reveals that OFDI does not respond uniformly to restrictions – equity limits, screening requirements, and personnel rules have varying effects. Additionally, a battery of heterogeneity checks is conducted to examine how foreign ownership decisions, sector-specific and cross-sectoral restrictions, and the North–South divide interact with regulatory barriers to influence OFDI. Results show that service-sector restrictions are particularly deterrent. The findings confirm strong sectoral complementarity and a pronounced North–South divide in regulatory sensitivity.

This study examines the interaction between privatization and foreign direct investment (FDI) in a mixed oligopoly characterized by international competition and technology diffusion. We develop a three-stage game-theoretic model where a domestic state-owned enterprise (SOE) competes with multiple technologically advanced foreign firms. The foreign firms enter the domestic market through either FDI or exports, with FDI generating technology spillovers to the domestic SOE. The analysis demonstrates that privatization enhances foreign firms’ incentives to undertake FDI, while partial privatization maximizes domestic welfare under both entry modes. The endogenous location choices of foreign firms impose constraints on the privatization policies. Although FDI generally yields higher welfare than exports, the government may over-privatize to induce FDI or refrain from privatization when the required degree of privatization is excessive. Therefore, the equilibrium privatization policy may deviate from the first-best outcome due to foreign firms’ strategic location choices.

This study presents an international comparison of relations between skills and labor market performance. Human capital theory emphasizes that skills have a positive effect on labor market performance, which is evident in most countries. However, skill levels do not have a positive impact on employability and wage in South Korea, unlike other OECD countries. Using data from the Programme for the International Assessment of Adult Competencies (PIAAC), we analyze how various skill dimensions influence employment outcomes and wage levels. The skills measured in PIAAC are plausible values. Therefore, our methodology entails estimating regression coefficients and presenting the final estimates as the averages of these coefficients. Standard errors are computed through repeated sampling using the jackknife technique. The findings of this study indicate that policies focusing solely on the supply side of skills, such as expanding education and training, may have a limited impact on improving employment and wages in Korean labor market. While human capital investment remains crucial for labor market outcomes, the results suggest that Korea could achieve greater effectiveness by complementing these efforts with workplace innovation policies aimed at increasing the demand for skills.

International trade integration plays a crucial role in economic growth and governments’ solvency, in the context of emerging markets and developing countries. This paper empirically examines the impacts of joining a free trade agreement with a more developed partner on fiscal capability. Using plausibly causal estimates based on a Synthetic Control Method, the paper finds the Vietnam–Korea Free Trade Agreement helps Vietnam to borrow more from the Republic of Korea. The agreement also helps Vietnam to be less reliant on external borrowing from other international lenders. These results are robust to changing the pool of control countries. The findings echo the literature on the positive role of free trade agreements in enhancing low- and middle-income countries’ capability of external borrowing, especially the lending role of direct partners, which is essential for low- and middle-income countries to necessarily finance growth targets and enhance resilience against global economy’s volatilities.

The phenomenon of reverse payments, which is common in the pharmaceutical industry, is relatively unpopular in other industries because of antitrust-related legal issues in various countries. In this study, we first examine a basic model with one original and one generic manufacturer, in which the original manufacturer may propose pay for delaying (P4D) entry of the generic manufacturer. We show that the original and generic manufacturers have incentives to engage in P4D, and when doing so, consumer surplus and social welfare always decline. Next, we add another original manufacturer to the basic model. If this manufacturer is a domestic firm, P4D will increase social welfare if drugs are close to homogeneous products and the additional manufacturer is efficient. However, if this manufacturer is a foreign firm, P4D will always reduce social welfare. These results suggest the need to consider whether the drug market is internationalized when deciding whether to regulate P4D.

This study examines the effect of economic complexity on governance indicators. We use instrumental variable quantile regression to estimate a panel data model for 78 developing countries over the period 2000–2019. The results show that there is a positive relationship between economic complexity and overall governance; however, the effect varies according to the distribution of the different governance indicators. More specifically, our results show that economic complexity improves political governance only for the higher quantiles. The effect varies positively along the distribution of economic governance. For institutional governance, the effect of economic complexity is statistically significant for the median and upper quantiles. Our results also allow us to show that the effects of economic complexity on governance differ significantly between quantiles of the distribution in low- and middle-income countries. Finally, human capital, FDI inflows and reductions in income inequality are the channels through which economic complexity affects governance.

This paper studies the welfare cost of fiscal policy in developing economies where a significant fraction of the population is government spending-dependent, using as an example Morocco. We develop a Dynamic General Equilibrium model representing an economy populated by three types of households: Standard Ricardian households with access to the financial market, households who supply labor but have no access to the financial market, and non-active government-dependent households (who behave as hand-to-mouth agents). The paper computes welfare changes of different tax rates and alternative spending policies and quantifies the trade-off of fiscal policy across the different groups of agents. We find that: (i) Distortions from some taxes can be positive due to the presence of public inputs; (ii) Output efficiency can be gained by changing the tax mix while keeping constant fiscal revenues; and (iii) Social welfare gains can be obtained by increasing public investment and reducing government consumption and keeping lump-sum transfers constant.

Public private partnership in infrastructure development can be used as an ‘off the balance' tool to help governments hide real fiscal problems and facilitate the transfer of debt-repayments to their succeeding administrations. Using negative binomial regressions on a panel dataset of 40 low-and middle-income countries from 1992 to 2021, the paper finds that governments which high short-term external debts in stock and flows measurements are more motivated to participate in public private partnership. The results are robust through sensitive tests on different sampled dataset. These findings reaffirm the existence of fiscally opportunistic behaviors of public sectors in public private partnership in low-and middle-income countries. Results also indicate that governments which face re-election limitations have stronger motivations to implement infrastructure projects via public private partnership. These impacts are found to be stronger in less-developed economies and in Sub-Saharan African countries.

This research attempts to examine the effects of economic complexity and shadow economy on income inequality for a panel dataset of 99 countries. The two-step system GMM estimation is employed to capture the non-linear relationships among interested variables. The findings indicate that income disparity is significantly and non-linearly linked with economic complexity and gray economy. First, there exists a U-shaped relationship between economic complexity and income disparity. The turning point for which the effect of economic complexity on income inequality changes from negative to positive is −0.732. Second, the impact of the shadow economy on income inequality displays an inverted U-shaped pattern. The estimated threshold above which the marginal effect of the shadow economy on income inequality changes from positive to negative equals 15.6%. Given the complications of these relationships, the governments are advised to take into consideration the situation of these two socio-economic issues when developing income distribution-related policies.

We employ the GARCH-MIDAS model to examine whether low-frequency macroeconomic variables help to explain the high-frequency volatility of the foreign investors’ net purchase in Korean stock market. The estimation results show that business cycle expansion along with high production growth, high inflation and low unemployment rate predicts high volatility in the near future. Higher interest rate and lower money growth are also likely to lead to higher volatility of foreign investors’ net purchase. We also find that domestic macroeconomic variables, relative to the US variables, have a stronger correlation with the future volatility of foreign investors’ net purchase.