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Trade costs, wage rates, technologies, and reverse imports

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  • Jota Ishikawa
  • Yoshimasa Komoriya

Abstract

This paper explores the effects of transport costs, tariffs, and foreign wage rates on the domestic economy in the presence of reverse imports, with special emphasis on inter‐firm cost asymmetry in an international oligopoly model. To serve the domestic market, a foreign firm produces in the foreign country, while two domestic firms produce either at home or abroad. Surprisingly, an increase in the foreign wage rate may increase the profits of a firm producing in the foreign country. Even if all firms produce in the foreign country, an increase in the foreign wage rate may improve domestic welfare. Ce texte explore les effets des coûts de transport et des taux de salaires à l'étranger sur l'économie domestique quand il y a importations renversées en provenance du pays où on a exporté ses ressources. On met l'accent en particulier sur l'asymétrie des coûts entre firmes dans un modèle d'oligopole international. Pour servir son marché domestique, une firme étrangère produit dans un pays étranger, alors que deux firmes domestiques produisent soit dans leur pays d'origine ou à l'étranger. On note avec surprise qu'un accroissement du taux de salaire à l'étranger peut accroître les profits d'une firme qui produit à l'étranger. Même si toutes les firmes produisent dans un pays étranger, un accroissement du taux de salaire à l'étranger peut améliorer le niveau de bien‐être domestique.

Suggested Citation

  • Jota Ishikawa & Yoshimasa Komoriya, 2009. "Trade costs, wage rates, technologies, and reverse imports," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(2), pages 615-638, May.
  • Handle: RePEc:wly:canjec:v:42:y:2009:i:2:p:615-638
    DOI: 10.1111/j.1540-5982.2009.01521.x
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    Cited by:

    1. KOMORIYA Yoshimasa, 2014. "How the Movement of Natural Persons Agreement Could Fuel FTAs," Discussion papers 14041, Research Institute of Economy, Trade and Industry (RIETI).
    2. Arijit Mukherjee & Umut Erksan Senalp, 2021. "Firm‐productivity and cross border merger," Review of International Economics, Wiley Blackwell, vol. 29(4), pages 838-859, September.
    3. Hiroshi Mukunoki, 2017. "The welfare effect of a free trade agreement in the presence of foreign direct investment and rules of origin," Review of International Economics, Wiley Blackwell, vol. 25(4), pages 733-759, September.
    4. Haitao CHENG & ISHIKAWA Jota, 2021. "Carbon Tax and Border Tax Adjustments with Technology and Location Choices," Discussion papers 21030, Research Institute of Economy, Trade and Industry (RIETI).
    5. Yan, Yan & Li, Yi, 2023. "Technology spillovers, strategic environmental policy, and foreign direct investment," Energy Economics, Elsevier, vol. 127(PA).

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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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