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Vertical and Horizontal Dimensions of Trade Liberalization

  • Sebastián Claro

    ()

    (Instituto de Economía. Pontificia Universidad Católica de Chile.)

FDI introduces competition between foreign and domestic firms at the factor market level. If the latter are technology backward, cost pressures render them uncompetitive, and absolute advantage determine the pattern of foreign and domestic firms’ production. To compensate for technology deficiencies, countries introduce distortions in product and factor markets. Trade liberalization, i.e., the removal of these distortions, have important implications for production and employment patterns, wages and capital flows. I provide evidence that China’s policies to protect domestic -specially state-owned- firms match the model’s prediction on the structure of interventions.

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Paper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 265.

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Date of creation: 2004
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Publication status: Published as "Why Does China Protect its Labour-Intensive Industries More?", The Economics of Transition, 14 (2): 289-319, 2006.
Handle: RePEc:ioe:doctra:265
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  12. Groves, Theodore & Yongmiao Hong & John McMillan & Barry Naughton, 1995. "China's Evolving Managerial Labor Market," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 873-92, August.
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  15. Nicita, Alessandro & Olarreaga, Marcelo, 2001. "Trade and production, 1976-99," Policy Research Working Paper Series 2701, The World Bank.
  16. Robert E. Lipsey, 2002. "Home and Host Country Effects of FDI," NBER Working Papers 9293, National Bureau of Economic Research, Inc.
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