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FDI in Post-Production Services and Product Market Competition

  • Ishikawa, Jota
  • Morita, Hodaka
  • Mukunoki, Hiroshi

Post-production services, such as sales, distribution, and maintenance, comprise a crucial element of business activity. We explore an international duopoly model in which a foreign .rm has the option of outsourcing post-production services to its domestic rival or providing those services by establishing its own facilities through FDI. We demonstrate that trade liberalization in goods may hurt domestic consumers and lower world welfare, and that the negative welfare impacts are turned into positive ones if service FDI is also liberalized. This .nding yields important policy implications, given the reality that the progress of liberalization in service sectors is still limited.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/18427/1/070ccesDP_29.pdf
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Paper provided by Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University in its series CCES Discussion Paper Series with number 29.

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Length: 28, [2] p.
Date of creation: Apr 2010
Date of revision:
Handle: RePEc:hit:ccesdp:29
Note: First Version: December, 2006; This Version: April, 2010
Contact details of provider: Postal: 2-1 Naka, Kunitachi City, Tokyo 186-8601
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Web page: http://www.econ.hit-u.ac.jp/~cces/

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  1. Antras, Pol, 2005. "Incomplete Contracts and the Product Cycle," Scholarly Articles 3196324, Harvard University Department of Economics.
  2. Chen, Yongmin & Ishikawa, Jota & Yu, Zhihao, 2001. "Trade Liberalization and Strategic Outsourcing," Discussion Papers 2001-04, Graduate School of Economics, Hitotsubashi University.
  3. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  4. Antras, Pol, 2003. "Firms, Contracts, and Trade Structure," Scholarly Articles 3196328, Harvard University Department of Economics.
  5. Konan Denise Eby & MASKUS Keith E., . "Quantifying the Impact of Services Liberalization in a Developing Country," EcoMod2002 330800043, EcoMod.
  6. Ishikawa, Jota & Morita, Hodaka & Mukunoki, Hiroshi, 2010. "FDI in Post-Production Services and Product Market Competition," CCES Discussion Paper Series 29, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
  7. Sanna-Randaccio, Francesca, 1996. "New protectionism and multinational companies," Journal of International Economics, Elsevier, vol. 41(1-2), pages 29-51, August.
  8. Joseph F. Francois & Ian Wooton, 2007. "Market structure and market access," Economics working papers 2007-06, Department of Economics, Johannes Kepler University Linz, Austria.
  9. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
  10. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-42, March.
  11. Pol Antràs & Elhanan Helpman, 2003. "Global Sourcing," NBER Working Papers 10082, National Bureau of Economic Research, Inc.
  12. Horst Raff & Marc von der Ruhr, 2007. "Foreign Direct Investment in Producer Services: Theory and Empirical Evidence," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(3), pages 299-321.
  13. Elhanan Helpman & Gene M. Grossman, 2002. "Managerial Incentives and the International Organization of Production," NBER Working Papers 9403, National Bureau of Economic Research, Inc.
  14. Yongmin Chen, 2000. "On Vertical Mergers and Their Competitive Effects," Econometric Society World Congress 2000 Contributed Papers 0383, Econometric Society.
  15. Roy, Martin & Marchetti, Juan & Lim, Hoe, 2007. "Services liberalization in the new generation of preferential trade agreements (PTAs): how much further than the GATS?," World Trade Review, Cambridge University Press, vol. 6(02), pages 155-192, July.
  16. repec:hrv:faseco:4784029 is not listed on IDEAS
  17. James Markusen & Thomas Rutherford & David Tarr, 2005. "Trade and direct investment in producer services and the domestic market for expertise," Canadian Journal of Economics, Canadian Economics Association, vol. 38(3), pages 758-777, August.
  18. Stephen S. Golub, 2003. "Measures of Restrictions on Inward Foreign Direct Investment for OECD Countries," OECD Economic Studies, OECD Publishing, vol. 2003(1), pages 85-116.
  19. Robert C. Feenstra & Gordon H. Hanson, 2004. "Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm," NBER Working Papers 10198, National Bureau of Economic Research, Inc.
  20. Martin Richardson, . "Trade Policy and Access to Retail Distribution," EPRU Working Paper Series 97-23, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  21. Barbara J. Spencer, 2005. "International Outsourcing and Incomplete Contracts," NBER Working Papers 11418, National Bureau of Economic Research, Inc.
  22. Clement Yuk Pang Wong & Jinhui Wu & Anming Zhang, 2006. "A Model of Trade Liberalization in Services," Review of International Economics, Wiley Blackwell, vol. 14(1), pages 148-168, 02.
  23. Joseph F. Francois, 1990. "Trade in Producer Services and Returns Due to Specialization under Monopolistic Competition," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 109-24, February.
  24. Stephen S. Golub, 2003. "Measures Of Restrictions on Inward Foreign Direct Investment for OECD Countries," OECD Economics Department Working Papers 357, OECD Publishing.
  25. Markusen, James R, 1989. "Trade in Producer Services and in Other Specialized Intermediate Inputs," American Economic Review, American Economic Association, vol. 79(1), pages 85-95, March.
  26. Djajic, Slobodan & Kierzkowski, Henryk, 1989. "Goods, Services and Trade," Economica, London School of Economics and Political Science, vol. 56(221), pages 83-95, February.
  27. Sharkey, William W. & Sibley, David S., 1993. "A Bertrand model of pricing and entry," Economics Letters, Elsevier, vol. 41(2), pages 199-206.
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