This paper presents a model that introduces foreign firms' competition in product and factor markets in an otherwise standard tariff liberalization setting. Pressures on factor markets from more advanced foreign firms undermine the competitive position of native enterprises. The final impact on native firms' employment, the country's comparative advantage and factor returns depend on the size and dispersion of the technology differences, the ability of native firms to imitate more advanced technologies and the final tariff structure. The case of China's entry into the WTO reveals the relevance of this feature, as the elimination of the dual economic structure is mandated by the WTO along with a fall in tariffs. The results show that in the short run the required process of FDI liberalization can generate a substantial impact on the factorial distribution of income and may imply a shift toward a more labor intensive mix of production, depending on the degree of technological imitations. However, nothing can be said with respect to the long run pattern of production.
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Paper provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number
209.
Length: Date of creation: 2002 Date of revision: Publication status: Published as "Why Does China Protect its Labour-Intensive Industries More?", The Economics of Transition, 14 (2): 289-319, 2006. Handle: RePEc:ioe:doctra:209
Find related papers by JEL classification: F1 - International Economics - - Trade F2 - International Economics - - International Factor Movements and International Business
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Rudiger Dornbusch & Holger C. Wolf, 1994.
"East German Economic Reconstruction,"
NBER Chapters,
in: The Transition in Eastern Europe, Volume 1, pages 155-190
National Bureau of Economic Research, Inc.
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