Abstract

Incorporating recent evidence that FDI firms are more efficient than exporters into a general oligopolistic equilibrium model, this paper examines the welfare effects of trade and FDI liberalization. We find that trade liberalization alone is beneficial if the difference in marginal cost between the exporting and FDI industries is small enough while FDI liberalization unambiguously improves welfare. Combining these results, we further show that simultaneous liberalization of trade and FDI necessarily turns out welfare-improving.

Full Text
Published version (Free)

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call