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The Complementarity between Endogenous Protection and Direct Foreign Investment


  • Zhao, Laixun


This paper studies the endogenous relationship between direct foreign investment (DFI) and trade restriction. A domestic labor union interested in both employment and wages bargains with a foreign firm and lobbies against foreign imports. By endogeneizing the wage rate and incorporating resource-using lobbying, we show that more DFI results in higher lobbying efforts and lower imports under fairly general conditions, i.e. a reversal of quid pro quo DFI. We also conduct comparative statics analysis on wages and lobbying efforts.

Suggested Citation

  • Zhao, Laixun, 1995. "The Complementarity between Endogenous Protection and Direct Foreign Investment," ビジネス創造センターディスカッション・ペーパー (Discussion papers of the Center for Business Creation) 10252/4186, Otaru University of Commerce.
  • Handle: RePEc:ota:busdis:10252/4186

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    References listed on IDEAS

    1. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
    2. Thusnelda Tivig & Uwe Walz, 2000. "Market share, cost-based dumping, and anti-dumping policy," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 69-86, February.
    3. Davies, Stephen W. & McGuinness, Anthony J., 1982. "Dumping at less than marginal cost," Journal of International Economics, Elsevier, vol. 12(1-2), pages 169-182, February.
    4. Anderson, James E, 1992. "Domino Dumping, I: Competitive Exporters," American Economic Review, American Economic Association, vol. 82(1), pages 65-83, March.
    5. Blackstone, Erwin A, 1975. "Restrictive Practices in the Marketing of Electrofax Copying Machines and Supplies: The SC M Corporation Case," Journal of Industrial Economics, Wiley Blackwell, vol. 23(3), pages 189-202, March.
    6. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    7. Bernhofen, Daniel M., 1995. "Price dumping in intermediate good markets," Journal of International Economics, Elsevier, vol. 39(1-2), pages 159-173, August.
    8. Walter Y. Oi, 1971. "A Disneyland Dilemma: Two-Part Tariffs for a Mickey Mouse Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 85(1), pages 77-96.
    9. Ishikawa, Jota & Spencer, Barbara J., 1999. "Rent-shifting export subsidies with an imported intermediate product," Journal of International Economics, Elsevier, vol. 48(2), pages 199-232, August.
    10. Shy,Oz, 2001. "The Economics of Network Industries," Cambridge Books, Cambridge University Press, number 9780521800952, March.
    11. Gruenspecht, Howard K., 1988. "Dumping and dynamic competition," Journal of International Economics, Elsevier, vol. 25(3-4), pages 225-248, November.
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    Cited by:

    1. Blonigen, Bruce A. & Ohno, Yuka, 1998. "Endogenous protection, foreign direct investment and protection-building trade," Journal of International Economics, Elsevier, vol. 46(2), pages 205-227, December.
    2. Koichi Kagitani, 2003. "Resistance to Trade Liberalization in Unionized Sector," Open Economies Review, Springer, vol. 14(4), pages 419-435, October.
    3. Pi, Jiancai & Zhou, Yu, 2013. "Institutional quality and skilled–unskilled wage inequality," Economic Modelling, Elsevier, vol. 35(C), pages 356-363.


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