Services Tradability, Trade Liberalization and Foreign Direct Investment
The authors analyze a two-country, general equilibrium model. The countries are identical, except for the existence of an efficiently operating market for producer services in one country, which allows it to gain cost advantages by using differentiated services as an intermediate input in the production process. Foreign manufacturers can only use these if there is international exchange in services products or services technology. The welfare effects of liberalizing trade in services are mixed. Not only the distinction between trade in services output and foreign direct investment is important, but also the specific mode by which foreign direct investment is conducted. Copyright 1996 by The London School of Economics and Political Science.
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Volume (Year): 63 (1996)
Issue (Month): 252 (November)
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