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Tariff Jumping and Joint Ventures

Author

Listed:
  • Hamid Beladi

    (Department of Economics, College of Business, University of Texas at San Antonio, One UTSA Circle, San Antonio, TX 78249-0633, USA)

  • Sugata Marjit

    () (Centre for Studies in Social Sciences, Calcutta 700-094, West Bengal, India)

  • Avik Chakrabarti

    () (Department of Economics, 816 Bolton Hall, College of Letters and Science, University of Wisconsin–Milwaukee, P.O. Box 413, Milwaukee, WI 53201, USA)

Abstract

It is well known that high tariffs tend to induce foreign direct investment (FDI) by encouraging the investors to jump the ‘‘tariff wall.’’ This paper examines the economic interaction among tariffs, FDI, and international joint ventures (IJV). We show that in the presence of a strong local competitor, even if opening a fully owned subsidiary is not profitable to a foreign firm, the foreign firm may still enter the host country market through IJV. However, IJV is not profitable for sufficiently high tariff rates. Hence, we argue that liberal trade policies may attract foreign investments through the formation of joint ventures.

Suggested Citation

  • Hamid Beladi & Sugata Marjit & Avik Chakrabarti, 2009. "Tariff Jumping and Joint Ventures," Southern Economic Journal, Southern Economic Association, vol. 75(4), pages 1256-1269, April.
  • Handle: RePEc:sej:ancoec:v:75:4:y:2009:p:1256-1269
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    References listed on IDEAS

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    Cited by:

    1. Zou, Yuxiang & Chen, Tai-Liang, 2016. "International joint venture and welfare-improving tariff-tax reforms," International Review of Economics & Finance, Elsevier, vol. 46(C), pages 27-35.
    2. Beladi, Hamid & Mukherjee, Arijit, 2012. "Footloose foreign firm and profitable domestic merger," Journal of Economic Behavior & Organization, Elsevier, vol. 83(2), pages 186-194.
    3. Basak, Debasmita & Mukherjee, Arijit, 2014. "Optimal contract under brand name collaboration," Economic Modelling, Elsevier, vol. 37(C), pages 238-240.
    4. repec:eee:reveco:v:49:y:2017:i:c:p:515-535 is not listed on IDEAS
    5. Tai-Liang Chen & Yuanyuan Ma, 2010. "International joint venture, commitment and host-country policy in an integrated market," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 57(4), pages 411-421, December.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • D2 - Microeconomics - - Production and Organizations
    • P - Economic Systems

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