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International Capital Mobility, Shadow Prices, and the Cost of Protection

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  • Neary, Peter
  • Ruane, Frances P

Abstract

This paper studies the welfare losses from tariff protection in a general model of a small, open economy where some factors are internationally mobile. It is shown that, whether or not the economy remains incompletely specialized, international factor mobility must raise the cost of protection. This result is illustrated in the context of the specific-factors and Heckscher-Ohlin models. In addition, its relationship to earlier work on immiserising capital inflows and on negative shadow prices for factors of production is examined, which allows us to synthesize a number of recent results within a common framework. Copyright 1988 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 29 (1988)
Issue (Month): 4 (November)
Pages: 571-85

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Handle: RePEc:ier:iecrev:v:29:y:1988:i:4:p:571-85

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Cited by:
  1. Egbert, Henrik & Naqvi, Nadeem, 2011. "Market-dependent production set," MPRA Paper 33829, University Library of Munich, Germany.
  2. de Melo, J. & Tarr, D., 1994. "VERs Under Imperfect Competition and Foreing Direct Investment: A Case study of the US-Japan Auto VER," Research Papers by the Department of Economics, University of Geneva 94.09, Département des Sciences Économiques, Université de Genève.
  3. Mamit Deme & David Franck & Nadeem Naqvi, 2005. "A General Equilibrium Skill Acquisitions Model Of Development For Lesotho," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 30(1), pages 15-29, June.
  4. Klodt, Henning, 1988. "Industrial policy and repressed structural change in West Germany," Kiel Working Papers 322, Kiel Institute for the World Economy.
  5. Jones, Ronald W., 2000. "Private interests and government policy in a global world," European Journal of Political Economy, Elsevier, vol. 16(2), pages 243-256, June.
  6. Marjit, Sugata & Beladi, Hamid, 1996. "Protection and the gainful effects of foreign capital," Economics Letters, Elsevier, vol. 53(3), pages 311-316, December.
  7. Kar, Saibal & Marjit, Sugata, 2004. "Wages, labour mobility and international trade," MPRA Paper 24101, University Library of Munich, Germany.
  8. de Melo, Jaime & Tarr, David, 1991. "VERs under imperfect competition and foreign direct investment : a case study of the U.S. - Japan auto VER," Policy Research Working Paper Series 667, The World Bank.
  9. Michael S. Michael & Sajal Lahiri & Panos Hatzipanayotou, 2013. "Piecemeal Reform of Domestic Indirect Taxes toward Uniformity in the Presence of Pollution: with and without a Revenue Constraint," University of Cyprus Working Papers in Economics 03-2013, University of Cyprus Department of Economics.
  10. Basu, Arnab K. & Chau, Nancy H., 1999. "Adverse selection, asymmetric information, and foreign investment policies," International Review of Economics & Finance, Elsevier, vol. 8(3), pages 239-252, September.
  11. Broll, Udo & Hansen, Sabine & Marjit, Sugata, 2004. "Domestic labor, foreign capital and national welfare," Dresden Discussion Paper Series in Economics 12/04, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  12. Kreickemeier, Udo & Raimondos-Møller, Pascalis, 2006. "Concertina Reforms with International Capital Mobility," CEPR Discussion Papers 5888, C.E.P.R. Discussion Papers.
  13. Philip L. Brock & Stephen J. Turnovsky, 1992. "The Growth and Welfare Consequences of Differential Tariffs With Endogenously-Supplied Capital and Labor," NBER Working Papers 4011, National Bureau of Economic Research, Inc.
  14. Ronald W. Jones, 2000. "Private Interests and Government Policy in a Global World," Tinbergen Institute Discussion Papers 00-051/2, Tinbergen Institute.
  15. Lal, Anil K., 1995. "Increasing returns, urban unemployment, and international capital mobility: A trade policy analysis," Journal of Development Economics, Elsevier, vol. 46(1), pages 181-193, February.
  16. Devereux, John & Roberts, Bryan, 1997. "Direct Foreign Investment and Welfare in the Transforming Economies: The Case of Central Asia," Journal of Comparative Economics, Elsevier, vol. 24(3), pages 297-312, June.
  17. Michael S. Michael & Panos Hatzipanayotou, 2012. "Pollution and Reforms of Domestic and Trade Taxes towards Uniformity," University of Cyprus Working Papers in Economics 11-2012, University of Cyprus Department of Economics.
  18. repec:dgr:uvatin:2000051 is not listed on IDEAS
  19. George Darko & Richard Dusansky & Pankaj Maskara & Nadeem Naqvi, 2006. "The gains from trade in a small monetary economy," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(4), pages 403-430.
  20. Michael Michael & Panos Hatzipanayotou, 2013. "Pollution and reforms of domestic and trade taxes towards uniformity," International Tax and Public Finance, Springer, vol. 20(5), pages 753-768, October.

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