Are Foreign Firms Privileged By Their Host Governments

1
Are Foreign Firms Privileged By Their Host
Governments?

• Raymond Fisman
• Columbia University GSB and NBER

2
Foreign Firms and Regulation Hypotheses

• Foreign Firms face lower regulatory hassles
• Effect is stronger in corrupt countries

3
Foreign Firms and Reduced Regulatory Hassle
Questions

• Is it true?
• Why is it true?
• Is this a problem?

4
Empirical Results Some concerns

• Unobserved differences in propensity to kvetch
• Subjectivity correlated with domesticity
• Look for complaints unrelated to regulation as
  control
• Clustering of standard errors
• Unobserved heterogeneity
• Report results with and without basic controls
• Add interactive controls for corruption results
• Correlation matrix

5
Why do foreign firms face lower hassles? A couple
of possibilities

• Foreign Large Powerful
• Foreign Buyer Power

6
Differentiating among explanations

• Can we wipe out the foreign firm dummy with
  covariates?
• Sunken-ness of investment do governments give a
  (relatively) hassle-free existence to low sunk
  cost foreigners?

7
Sunken-ness and Hassle Example
Ownership
Domestic
Foreign
High
Sunken-ness
Low
8
Do we care (socially speaking)?

• Capture vs. give-away
• Tie to literature on beggar-thy-neighbor
  regulation