Article citationsMore>>

Pennings, E. (2005) How to Maximize Domestic Benefits from Foreign Investments: The Effect of Irreversibility and Uncertainty. Journal of Economic Dynamics and Control, 29, 873-889.
https://doi.org/10.1016/j.jedc.2004.05.002

has been cited by the following article:

• TITLE: Counter Cowbell Effect in a Stochastic Market: Does Subsidy Really Induce Foreign Direct Investment?

  AUTHORS: Yasunori Fujita

  KEYWORDS: Counter Cowbell Effect, Foreign Direct Investment, Optimal Stopping Theory, Value of Waiting

  JOURNAL NAME: Modern Economy, Vol.9 No.4, April 27, 2018

  ABSTRACT: In the present paper, we examine if the “cowbell” attracts foreign direct investment, i.e., if the investment-attracting subsidy really induces foreign direct investment. The framework we construct is an international trade model where one firm intends a foreign direct investment under uncertainty that is expressed by geometric Brownian motion. It is revealed that contrary to the intention of the government of the host country, the cowbell does not work, that is, the investment-attracting subsidy postpones the optimal timing of foreign direct investment.