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FDI in Post-Production Services and Product Market Competition

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  • Jota Ishikawa
  • Hodaka Morita
  • Hiroshi Mukunoki

Abstract

Post-production services, such as sales, distribution, and maintenance, comprise a crucial element of business activity. We explore an international duopoly model in which a foreign firm has the option of outsourcing post-production services to its domestic rival or providing those services by establishing its own facilities through FDI. We demonstrate that trade liberalization in goods may hurt domestic consumers and lower world welfare, and that the negative welfare impacts are turned into positive ones if service FDI is also liberalized. This finding yields important policy implications, given the reality that the progress of liberalization in service sectors is still limited.

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File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd10-136.pdf
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Bibliographic Info

Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd10-136.

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Date of creation: Apr 2010
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Handle: RePEc:hst:ghsdps:gd10-136

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Keywords: post-production services; trade liberalization; FDI; outsourcing; international oligopoly;

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References

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  1. Martin Richardson, . "Trade Policy and Access to Retail Distribution," EPRU Working Paper Series 97-23, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  2. Yongmin Chen & Jota Ishikawa & Zhihao Yu, 2002. "Trade Liberalization and Strategic Outsourcing," Carleton Economic Papers 02-12, Carleton University, Department of Economics, revised Jul 2004.
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Cited by:
  1. TAKECHI Kazutaka, 2008. "International Strategic Alliances for Local Market Entry: Direct Launches versus Marketing Alliances in Pharmaceuticals," Discussion papers 08022, Research Institute of Economy, Trade and Industry (RIETI).
  2. Jota Ishikawa & Hodaka Morita & Hiroshi Mukunoki, 2008. "FDI in Post-Production Services and Product Market Competition," Global COE Hi-Stat Discussion Paper Series gd08-004, Institute of Economic Research, Hitotsubashi University.
  3. ISHIKAWA Jota & OKUBO Toshihiro, 2013. "Trade and Industrial Policy Subtleties with International Licensing," Discussion papers 13050, Research Institute of Economy, Trade and Industry (RIETI).
  4. Dibyendu Maiti & Arijit Mukherjee, . "Governance, Foreign Direct Investment and Domestic Welfare," Discussion Papers 10/27, University of Nottingham, GEP.
  5. Arijit Mukherjee & Leonard F.S. Wang & Yingyi Tsai, . "Governance and foreign direct investment: is there a two-way relationship?," Discussion Papers 11/02, University of Nottingham, School of Economics.

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