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International Capital Mobility, Shadow Prices and the Cost of Protection

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  • Neary, J Peter
  • Ruane, Frances

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, as long as the economy remains incompletely specialised 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, we examine its relationship to earlier work on immiserising capital inflows and on negative shadow prices for factors of production. This allows us to synthesise a number of recent results within a common framework.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 58.

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Date of creation: Mar 1985
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Handle: RePEc:cpr:ceprdp:58

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Related research

Keywords: International Capital Mobility; Protection; Shadow Prices; Tariff-Induced Factor Movements;

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Cited by:
  1. 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.
  2. Marjit, Sugata & Beladi, Hamid, 1996. "Protection and the gainful effects of foreign capital," Economics Letters, Elsevier, vol. 53(3), pages 311-316, December.
  3. repec:dgr:uvatin:2000051 is not listed on IDEAS
  4. Henrik Egbert & Nadeem Naqvi, 2011. "Market-dependent Production Set," MAGKS Papers on Economics 201145, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  5. de Melo, Jaime & Tarr, David, 1996. "VERs under imperfect competition and foreign direct investment: A case study of the US-Japan auto VER," Japan and the World Economy, Elsevier, vol. 8(1), pages 11-33, March.
  6. 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.
  7. 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.
  8. 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.
  9. Kar, Saibal & Marjit, Sugata, 2004. "Wages, labour mobility and international trade," MPRA Paper 24101, University Library of Munich, Germany.
  10. Klodt, Henning, 1988. "Industrial policy and repressed structural change in West Germany," Kiel Working Papers 322, Kiel Institute for the World Economy.
  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. Cunha, Luis Campos e & Santos, Vasco, 1996. "Sleeping quotas, pre-emptive quota bidding and monopoly power," Journal of International Economics, Elsevier, vol. 40(1-2), pages 127-148, February.
  14. 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.
  15. 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.
  16. 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.
  17. Ronald W. Jones, 2000. "Private Interests and Government Policy in a Global World," Tinbergen Institute Discussion Papers 00-051/2, Tinbergen Institute.
  18. 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.
  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.

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