IDEAS home Printed from https://ideas.repec.org/a/bpj/bejeap/vtopics.6y2006i1n12.html
   My bibliography  Save this article

Capital Movements and the Political Economy of Trade Policy

Author

Listed:
  • Gomes Neto Delfim

    (Universidade de Vigo)

Abstract

We develop a political economy model of trade policy using a sector specific factor model with international capital mobility, looking for the relationship between protection and the composition of foreign capital. As foreign direct investment is remunerated at the marginal productivity of capital, an increase of the tariff raises its remuneration, increasing also the transfer of resources abroad. This is an additional cost of the tariff in terms of welfare. As external debt is remunerated at a given international interest rate, the additional cost of protection in terms of welfare does not appear. Then the equilibrium tariff with external debt is higher than with foreign direct investment. We present evidence for a panel of developing countries observed between 1970 and 1998 giving support to the main implication of the model. We find a significant effect of the composition of foreign capital on trade policy, implying that countries which have relatively more foreign direct investment than external debt also have less protection.

Suggested Citation

  • Gomes Neto Delfim, 2006. "Capital Movements and the Political Economy of Trade Policy," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-33, August.
    • Handle: RePEc:bpj:bejeap:v:topics.6:y:2006:i:1:n:12
    DOI: 10.2202/1538-0653.1324
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1538-0653.1324
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/1538-0653.1324?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Anonymous, 0. "Increasing Understanding Of Public Problems And Policies -- An Executive Summary; Highlights Of The 1998 National Public Policy Education Conference, Clackamas, Oregon, September 20-23, 1998," Increasing Understanding of Public Problems and Policies, Farm Foundation.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cole, Matthew T. & Davies, Ronald B., 2011. "Strategic tariffs, tariff jumping, and heterogeneous firms," European Economic Review, Elsevier, vol. 55(4), pages 480-496, May.
    2. Blanchard, Emily J., 2010. "Reevaluating the role of trade agreements: Does investment globalization make the WTO obsolete?," Journal of International Economics, Elsevier, vol. 82(1), pages 63-72, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Salvatore Dominick, 2004. "Globalization, Comparative Advantage, and Europe's Double Competitive Squeeze," Global Economy Journal, De Gruyter, vol. 4(1), pages 1-20, October.

    More about this item

    Keywords

    external debt; foreign direct investment; trade policy;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejeap:v:topics.6:y:2006:i:1:n:12. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.