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International capital mobility, shadow prices and the cost of protection

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  • J. Peter Neary
  • Frances P. Ruane

Abstract

This paper studies the welfare losses from tariff protection in a general model of a small open economy where some factors are internationally mobile. It is show that, as long as the economy remains incompletely specialised, international factor mobility must raise the cost of protection. This result is illustrated in the context of the specific-factors and Heckscher-Ohlin models. In addition, its relationship to earlier work on immiserising captial inflows on negative shadow prices for factors of production is examined, which allows us to synthesise a number of recent results within a common framework.

Suggested Citation

  • J. Peter Neary & Frances P. Ruane, 1984. "International capital mobility, shadow prices and the cost of protection," Working Papers 198432, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:198432
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    File URL: http://hdl.handle.net/10197/1941
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    Cited by:

    1. George Darko & Richard Dusansky & Pankaj Maskara & Nadeem Naqvi, 2006. "The gains from trade in a small monetary economy," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(4), pages 403-430.
    2. Hiro Lee & Dominique van der Mensbrugghe, 2001. "A General Equilibrium Analysis of the Interplay between Foreign Direct Investment and Trade Adjustments," Discussion Paper Series 119, Research Institute for Economics & Business Administration, Kobe University, revised Jul 2001.
    3. Raimondos, Pascalis & Kreickemeier, Udo, 2006. "Concertina Reforms with International Capital Mobility," CEPR Discussion Papers 5888, C.E.P.R. Discussion Papers.
    4. Jones, Ronald W., 2000. "Private interests and government policy in a global world," European Journal of Political Economy, Elsevier, vol. 16(2), pages 243-256, June.
    5. Jaime de Melo & David Tarr, 2015. "VERs under imperfect competition and foreign direct investment: A case study of the US–Japan auto VER," World Scientific Book Chapters, in: Modeling Developing Countries' Policies in General Equilibrium, chapter 22, pages 461-483, World Scientific Publishing Co. Pte. Ltd..
    6. Michael J. Hiscox, 2004. "International Capital Mobility And Trade Politics: Capital Flows, Political Coalitions, And Lobbying," Economics and Politics, Wiley Blackwell, vol. 16(3), pages 253-285, November.
    7. Michael Michael & Panos Hatzipanayotou, 2013. "Pollution and reforms of domestic and trade taxes towards uniformity," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(5), pages 753-768, October.
    8. Egbert, Henrik & Naqvi, Nadeem, 2011. "Market-dependent production set," MPRA Paper 33829, University Library of Munich, Germany.
    9. Marjit, Sugata & Beladi, Hamid, 1996. "Protection and the gainful effects of foreign capital," Economics Letters, Elsevier, vol. 53(3), pages 311-316, December.
    10. Yingfeng Xu, 2001. "Can Tariff-Jumping Foreign Investment Be Beneficial?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 26(1), pages 161-177, June.
    11. Cunha, Luis Campos e & Santos, Vasco, 1996. "Sleeping quotas, pre-emptive quota bidding and monopoly power," Journal of International Economics, Elsevier, vol. 40(1-2), pages 127-148, February.
    12. Elbehri, Aziz & Leetmaa, Susan, 2002. "How significant are export subsidies to agricultural trade? Trade and welfare implications of global reforms," Conference papers 330999, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    13. Philip L. Brock & Stephen J. Turnovsky, 1992. "The Growth and Welfare Consequences of Differential Tariffs With Endogenously-Supplied Capital and Labor," NBER Working Papers 4011, National Bureau of Economic Research, Inc.
    14. Nikos Tsakiris & Panos Hatzipanayotou & Michael S. Michael, 2022. "Tradable Emission Permits and Strategic Capital Taxation," DEOS Working Papers 2201, Athens University of Economics and Business.
    15. Kar, Saibal & Marjit, Sugata, 2004. "Wages, labour mobility and international trade," MPRA Paper 24101, University Library of Munich, Germany.
    16. Basu, Arnab K. & Chau, Nancy H., 1999. "Adverse selection, asymmetric information, and foreign investment policies," International Review of Economics & Finance, Elsevier, vol. 8(3), pages 239-252, September.
    17. Mamit Deme & David Franck & Nadeem Naqvi, 2005. "A General Equilibrium Skill Acquisitions Model Of Development For Lesotho," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 30(1), pages 15-29, June.
    18. Michael S. Michael & Sajal Lahiri & Panos Hatzipanayotou, 2015. "Piecemeal Reform of Domestic Indirect Taxes toward Uniformity in the Presence of Pollution: with and without a Revenue Constraint," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(2), pages 174-195, April.
    19. Emily J. Blanchard, 2009. "Trade taxes and international investment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(3), pages 882-899, August.
    20. Klodt, Henning, 1990. "Industrial policy and repressed structural change in West Germany," Open Access Publications from Kiel Institute for the World Economy 1417, Kiel Institute for the World Economy (IfW Kiel).
    21. Nikos Tsakiris & Panos Hatzipanayotou & Michael S. Michael, 2024. "Strategic capital taxation, tradable emission permits and global pollution," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(1), pages 276-296, February.
    22. Broll, Udo & Hansen, Sabine & Marjit, Sugata, 2004. "Domestic labor, foreign capital and national welfare," Dresden Discussion Paper Series in Economics 12/04, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    23. David Franck, 1999. "Tariff and Quota Reform with International Capital Mobility," Southern Economic Journal, John Wiley & Sons, vol. 66(1), pages 132-143, July.
    24. Lal, Anil K., 1995. "Increasing returns, urban unemployment, and international capital mobility: A trade policy analysis," Journal of Development Economics, Elsevier, vol. 46(1), pages 181-193, February.
    25. Devereux, John & Roberts, Bryan, 1997. "Direct Foreign Investment and Welfare in the Transforming Economies: The Case of Central Asia," Journal of Comparative Economics, Elsevier, vol. 24(3), pages 297-312, June.

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