@techreport{NBERw4876,
 title = "Foreign Investment with Endogenous Protection",
 author = "Gene Grossman and Elhanan Helpman",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "4876",
 year = "1994",
 month = "October",
 URL = "http://www.nber.org/papers/w4876",
 abstract = {Jagdish Bhagwati coined the phrase quid pro quo foreign investment to describe international investments made in anticipation of host country trade policy and perhaps with the intention of defusing a protectionist threat.  We apply Bhagwati's notion to situations where (i) foreign investment is best described as the (uncoordinated) opening of branch plants by multinational corporations, and (ii) protection is a political response by an incumbent government to offers of policy-contingent campaign contributions by domestic firms.  We examine the determinants of anticipatory foreign investment and study some of its welfare implications.  We also allow for lobbying by workers with sector- specific skills and show how the conflicting interests of these workers and the industrialists are resolved in determining policy toward foreign investment.},
}