Title: Are restrictions on foreign ownership counter-productive? Evidence from Dubai, United Arab Emirates

Authors: Azzeddine Azzam, Belaid Rettab

Addresses: University of Dubai & Dubai Chamber, Dubai, UAE; University of Nebraska-Lincoln, Lincoln, Nebraska 68583, USA. ' Dubai Chamber, Dubai, UAE

Abstract: The purpose of this paper is to estimate productivity gaps between firms with different shares of foreign equity in the presence of government restrictions on foreign ownership. Dubai, having such restrictions, and having multiple ownership structures within co-existing onshore and off-shore territories, provides a rich setting for examining the effect of alternative Foreign Direct Investment (FDI) regimes on productivity. What we find is that firms subjected to the 51/49 rule of ownership lag in productivity mostly in one sector of the economy. An implication of our results is that any move to reform the 51/49 rule should probably be sector-specific rather than across-the-board.

Keywords: Dubai; FDI; foreign direct investment; foreign ownership; 51/49 ownership rule; United Arab Emirates; UAE; productivity gaps; government restrictions.

DOI: 10.1504/IJEPEE.2011.038871

International Journal of Economic Policy in Emerging Economies, 2011 Vol.4 No.1, pp.1 - 19

Published online: 04 Mar 2011 *

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