Trade, FDI and Congestion: the Small and Very Open Economy
Typically, a small and open economy trades goods at given worl prices. Here, we present a model of a very open small economy, where capital and labor are internationally mobile, too. When targeting mobile capital ("FDI"), the economy's government attracts not only mobile capital but mobile labor, also. The paper also asks whether these results carry over to other very open small economies, or, regions.
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