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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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  1. Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc.
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  12. Michael Funke & Jörg Rahn, 2000. "How Efficient is the East German Economy? An Exploration With Micro Data," Quantitative Macroeconomics Working Papers 20012, Hamburg University, Department of Economics.
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  15. Françoise Lemoine, 2000. "FDI and the Opening Up of China's Economy," Working Papers 2000-11, CEPII research center.
  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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