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The liberalization of trade and foreign direct investment: a political economy analysis

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  • Josh Ederington
  • Phillip McCalman

Abstract

This paper considers the implications of having trade and investment liberalization occur at different points in time. It is found that such a sequencing can be detrimental to the process of liberalization, but can never be beneficial. In particular, it is possible to find distributions of factor ownership where simultaneous trade and investment liberalization would be acceptable to the median voter, yet trade liberalization followed by investment liberalization would not. Finally, the paper derives some predictions about the effect of relative size and factor intensity differences on the likelihood of investment liberalization.

Suggested Citation

  • Josh Ederington & Phillip McCalman, 2010. "The liberalization of trade and foreign direct investment: a political economy analysis," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 13(3), pages 225-240.
    • Handle: RePEc:taf:jecprf:v:13:y:2010:i:3:p:225-240
    DOI: 10.1080/17487870.2010.503084
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    References listed on IDEAS

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    1. Huiwen Lai & Daniel Trefler, 2002. "The Gains from Trade with Monopolistic Competition: Specification, Estimation, and Mis-Specification," NBER Working Papers 9169, National Bureau of Economic Research, Inc.
    2. S. Lael Brainard, 1993. "A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration," NBER Working Papers 4269, National Bureau of Economic Research, Inc.
    3. James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
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