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Trade versus Investment Liberalization

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  • James R. Markusen

Abstract

Despite several theoretical contributions and considerable informal empirical evidence" to the contrary, a notion that trade and investment are substitutes persists in trade policy" analysis. This paper considers the liberalization of commodity trade versus liberalization" allowing direct investment versus the two together. For a relatively skilled-labor-scarce" economy, I show that trade and investment liberalization are quite different together are in a sense complements. The intuition may be that direct investment provides such" a country with crucial inputs (knowledge-intensive producer services) without which the" country cannot effectively exploit its abundant factors in certain industries."

Suggested Citation

  • James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:6231
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    References listed on IDEAS

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    1. James R. Markusen & Anthony J. Venables, 2021. "The theory of endowment, intra-industry and multi-national trade," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 4, pages 69-94, World Scientific Publishing Co. Pte. Ltd..
    2. Jones, Ronald W. & Coelho, Isaias & Easton, Stephen T., 1986. "The theory of international factor flows: The basic model," Journal of International Economics, Elsevier, vol. 20(3-4), pages 313-327, May.
    3. James R. MARKUSEN, 2021. "Multinationals, Multi-Plant Economies, And The Gains From Trade," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 1, pages 3-24, World Scientific Publishing Co. Pte. Ltd..
    4. James R. MARKUSEN, 2021. "Factor Movements And Commodity Trade As Complements," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 15, pages 325-340, World Scientific Publishing Co. Pte. Ltd..
    5. James R. Markusen & Anthony J. Venables, 2021. "Multinational firms and the new trade theory," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 3, pages 47-67, World Scientific Publishing Co. Pte. Ltd..
    6. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
    7. James R. Markusen & Anthony J. Venables, 1996. "Multinational Production, Skilled Labor and Real Wages," NBER Working Papers 5483, National Bureau of Economic Research, Inc.
    8. J. Peter Neary, 1995. "Factor Mobility and International Trade," Canadian Journal of Economics, Canadian Economics Association, vol. 28(s1), pages 4-23, November.
    9. Rutherford, Thomas F., 1995. "Extension of GAMS for complementarity problems arising in applied economic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 19(8), pages 1299-1324, November.
    10. Donald J. Robbins, 1996. "Evidence on Trade and Wages in the Developing World," OECD Development Centre Working Papers 119, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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