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Vertical and Horizontal Dimensions of Trade Liberalization

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Author Info
Sebastián Claro () (Instituto de Economía. Pontificia Universidad Católica de Chile.)
Abstract

FDI introduces competition between foreign and domestic firms at the factor market level. If the latter are technology backward, cost pressures render them uncompetitive, and absolute advantage determine the pattern of foreign and domestic firms’ production. To compensate for technology deficiencies, countries introduce distortions in product and factor markets. Trade liberalization, i.e., the removal of these distortions, have important implications for production and employment patterns, wages and capital flows. I provide evidence that China’s policies to protect domestic -specially state-owned- firms match the model’s prediction on the structure of interventions.

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Publisher Info
Paper provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 265.

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Date of creation: 2004
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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:265

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Related research
Keywords: Trade Integration; Tariffs; Capital Subsidies; FDI; Technology Transfers; China;

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References listed on IDEAS
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    Other versions:
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  19. George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1991-1), pages 1-106. [Downloadable!]
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