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Trade, FDI and Congestion - the Small and very Open Economy

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  • Dascher, Kristof

Abstract

Typically, a small and open economy trades goods at given world prices. Here, we present a model of a very open small economy, where capital and labour are internationally mobile, too. When investing into infrastructure, the economy’s government attracts not only mobile capital but mobile labour, too. These capital and labour inflows into the economy reinforce each other. They contribute to rising welfare for land owning indigenous households. But all potential benefits for land renting immigrant households are capitalized into higher land rents. The paper is also an attempt to give an account of the recent economic boom in Ireland.

Suggested Citation

  • Dascher, Kristof, 2000. "Trade, FDI and Congestion - the Small and very Open Economy," CEPR Discussion Papers 2526, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2526
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    References listed on IDEAS

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    1. Maurice J. Roche, 1999. "Irish House Prices - Will the Roof Cave In?," The Economic and Social Review, Economic and Social Studies, vol. 30(4), pages 343-362.
    2. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-1278, December.
    3. Kanemoto, Yoshitsugu, 1988. "Hedonic Prices and the Benefits of Public Projects," Econometrica, Econometric Society, vol. 56(4), pages 981-989, July.
    4. Yoshitsugu Kanemoto, 1980. "A Note on the Measurement of Benefits of Public Inputs," Canadian Journal of Economics, Canadian Economics Association, vol. 13(1), pages 135-142, February.
    5. Starrett, David A, 1981. "Land Value Capitalization in Local Public Finance," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 306-327, April.
    6. Holger Görg & Frances Ruane, 1997. "Reflections on Irish Industrial Policy towards Foreign Direct Investment," Economics Policy Papers 973, Trinity College Dublin, Department of Economics.
    7. John M. Hartwick, 1993. "Capitalization of Productivity Growth in Urban Land Rent," Working Papers 875, Queen's University, Department of Economics.
    8. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
    9. John FitzGerald, 1999. "Understanding Ireland's Economic Success," Papers WP111, Economic and Social Research Institute (ESRI).
    10. J. Peter Neary, 1995. "Factor Mobility and International Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 28(s1), pages 4-23, November.
    11. John FitzGerald & Ide Kearney, 1999. "Migration and the Irish Labour Market," Papers WP113, Economic and Social Research Institute (ESRI).
    12. Maurice J. Roche, 1999. "Irish house prices: will the roof fall in?," Economics, Finance and Accounting Department Working Paper Series n890699, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
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    Cited by:

    1. Dascher, Kristof, 2012. "Home Voters, House Prices, and the Political Economy of Zoning," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62069, Verein für Socialpolitik / German Economic Association.
    2. Frank Barry & Michael B. Devereux, 2006. "A Theoretical Growth Model for Ireland," The Economic and Social Review, Economic and Social Studies, vol. 37(2), pages 245-262.
    3. Michael Anyadike-Danes & Helena Lenihan & Mike Hart, 2009. "New Business Formation: An Important Element of Ireland's Rapid Growth Experience?," Working Papers wp380, Centre for Business Research, University of Cambridge.
    4. Barry, Frank, 2005. "Future Irish Growth: Opportunities, Catalysts, Constraints," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI), vol. 2005(4-Winter), pages 1-25.

    More about this item

    Keywords

    Foreign Direct Investment; Open City; Small Open Economy;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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