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The Possibility of Welfare Gains with Capital Inflows in a Small Tariff‐Ridden Economy

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  • Partha Sen
  • Arghya Ghosh
  • Abheek Barman

Abstract

Capital inflows with full repatriation give rise to welfare improvement possibilities in a small tariff‐distorted economy when imperfect competition and increasing returns are allowed for in one sector of a two‐sector model. This is in contrast to the Brecher–Alejandro proposition that capital inflows with full repatriation are necessarily immiserizing for a small tariff‐ridden economy. We find that welfare gains chances are greater (a) the higher the expenditure share of the capital‐intensive differentiated good; (b) the lower the substitutability between brands; and (c) the lower the share of tariff revenue in national income.

Suggested Citation

  • Partha Sen & Arghya Ghosh & Abheek Barman, 1997. "The Possibility of Welfare Gains with Capital Inflows in a Small Tariff‐Ridden Economy," Economica, London School of Economics and Political Science, vol. 64(254), pages 345-352, May.
  • Handle: RePEc:bla:econom:v:64:y:1997:i:254:p:345-352
    DOI: 10.1111/1468-0335.00082
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