Capital Movements and the Political Economy of trade Policy
AbstractConsidering a time consistent policy in a two-period political economy model of trade policy, where foreign capital is endogenously determined, the tariff and the level of foreign capital would be higher with external debt than with foreign direct investment. As foreign direct investment is remunerated at the marginal productivity of capital, an increase of the tariff increases its remuneration, increasing also the welfare costs of the tariff. Foreign direct investment can lead to free trade.
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Bibliographic InfoPaper provided by DELTA (Ecole normale supérieure) in its series DELTA Working Papers with number 2002-01.
Date of creation: 2002
Date of revision:
Other versions of this item:
- Delfim Gomes Neto, 2006. "Capital Movements and the Political Economy of Trade Policy," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 0(1), pages 12.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
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