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Tariffs, FDI with technology transfer and welfare in segmented factor markets

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  • Soumyatanu Mukherjee

    () (Indian Institute of Management Kozhikode)

Abstract

This paper, using a three-sector full employment general equilibrium model with segmented domestic factor markets, shows that policy of import restriction using tariffs can be beneficial for a small, open developing economy compared to the policy of import liberalisation, opposite to the conventional results. Also inflows of foreign-owned capital to an export sector within the export processing zone (EPZ) of the economy coupled with labour-augmenting type technology transfer can lead to welfare amelioration, even without the existence of segmentation in labour market. So these seemingly counterintuitive theoretical results support recent empirical findings suggesting that trade restrictions can promote growth and attract FDI for the developing countries, even when foreign capital enters one specific export sector of the economy

Suggested Citation

  • Soumyatanu Mukherjee, 2016. "Tariffs, FDI with technology transfer and welfare in segmented factor markets," Working papers 190, Indian Institute of Management Kozhikode.
  • Handle: RePEc:iik:wpaper:190
    as

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    File URL: http://iimk.ac.in/websiteadmin/FacultyPublications/WorkingPapers/190fullp.pdf?t=32
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    References listed on IDEAS

    as
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    4. Hamid Beladi & Sugata Marjit, 1992. "Foreign Capital and Protectionism," Canadian Journal of Economics, Canadian Economics Association, vol. 25(1), pages 233-238, February.
    5. Sarbajit Chaudhuri, 2003. "How and how far to liberalize a developing economy with informal sector and factor market distortions," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 12(4), pages 403-428.
    6. Hamada, Koichi, 1974. "An economic analysis of the duty-free zone," Journal of International Economics, Elsevier, vol. 4(3), pages 225-241, August.
    7. Chaudhuri, Sarbajit & Gupta, Manash Ranjan, 2014. "International factor mobility, informal interest rate and capital market imperfection: A general equilibrium analysis," Economic Modelling, Elsevier, vol. 37(C), pages 184-192.
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    9. Hamid Beladi & Lynda De la Vina & Sugata Marjit, 2012. "Technological Progress with Segmented Labor Markets," Review of Development Economics, Wiley Blackwell, vol. 16(1), pages 148-151, February.
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    12. Hamilton, Carl & E.O. Svensson, Lars, 1982. "On the welfare effects of a duty-free zone," Journal of International Economics, Elsevier, vol. 13(1-2), pages 45-64, August.
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    15. Sarbajit Chaudhuri, 2005. "Labour Market Distortion, Technology Transfer And Gainful Effects Of Foreign Capital," Manchester School, University of Manchester, vol. 73(2), pages 214-227, March.
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    More about this item

    Keywords

    Tariff; foreign capital; export processing zones; technology transfer; informal sector; economy;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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