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Goods and factors liberalization under increasing returns to scale

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  • Anil Lal

Abstract

This paper develops a general equilibrium model with alternative forms of import restrictions, international capital mobility, and taxes on the rate of return on foreign capital in the context of a small open economy using an external increasing returns technology. Within this framework, this paper analyses the price and welfare effects of import liberalization in the presence of tax on foreign capital and of factor flows liberalization in the presence of alternative forms of import restrictions. It is shown, among other things, that, in contrast to the existing literature on constant returns to scale economy, the optimal policy towards foreign factors is possibly tax under each form of import restrictions.

Suggested Citation

  • Anil Lal, 2001. "Goods and factors liberalization under increasing returns to scale," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 10(2), pages 115-131.
    • Handle: RePEc:taf:jitecd:v:10:y:2001:i:2:p:115-131
    DOI: 10.1080/09638190110039019
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    References listed on IDEAS

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