Understanding Local Content Decisions: Economic Analysis and an Application to the Automotive Industry
In industrializing regions, foreign investments often generate spillovers through regional backward links. This situation may create a gap between private and social valuations of resources, resulting in a level of local content below what would be optimal for the economy. This situation creates an opportunity for the enactment of domestic content regulations. This paper presents a model to understand how these policies condition the decisions of the economic agents and affect economic welfare. Then, it simulates the model using a case study of the automotive sector.
Link
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=930204