Domestic equity controls of multinational enterprises

We use a general equilibrium model to examine the welfare effect of domesti c equity requirements on multinational firms in the presence of alternative types of trade instruments and varying degrees of the mobility of foreign capital. It turns out that, under quotas, raising equity requirements impro ves welfare in the short run but reduces welfare in the long run, In contra st, when tariffs are in place, the policy of domestic equity requirements l owers welfare in the short run but raises welfare in the long run.