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Attitudes Towards Foreign Products and Welfare with Capital Mobility

  • Jean-Marc Callois
  • Carl Gaigné


We develop a model of trade with imperfect competition to study the welfare implications in developing and developed countries of the asymmetry in attitudes towards foreign products. In the developed country, consumers benefit from a better perception of foreign products while the rental rate of capital declines as long as the location of capital remains unchanged. However, when capital is mobile, the developing country hosts more and more capital at the expense of the developed country as perception of varieties produced in the developed country improves and the surplus of consumers in the developed country can decrease.

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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 21 (2010)
Issue (Month): 5 (November)
Pages: 751-770

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Handle: RePEc:kap:openec:v:21:y:2010:i:5:p:751-770
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  6. Verlegh, Peeter W. J. & Steenkamp, Jan-Benedict E. M., 1999. "A review and meta-analysis of country-of-origin research," Journal of Economic Psychology, Elsevier, vol. 20(5), pages 521-546, October.
  7. Gilles Grolleau & Tarik Lakhal & Naoufel Mzoughi, 2004. "Does Ethical Activism Lead to Firm Relocation?," Kyklos, Wiley Blackwell, vol. 57(3), pages 387-402, 08.
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