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Direct Foreign Investment In A Small Open Economy And Global Trade Liberalization In Agriculture: A Note


  • Sarbajit Chaudhuri

    (Dept. of Economics, Calcutta University, India)


In a production structure reasonable for a developing economy this note shows that there may arise a conflict between the worldwide liberalized trade policies in agriculture, which raise the price of the economy’s primary exportable commodity, and the inflow of foreign capital into the economy. However, if the economy strictly adheres to the different facets of the agricultural trade liberalization policies, e.g. the removal of the indirect farm subsidies, the paper argues that the possible conflict may be avoided. The paper provides a theoretical basis for the removal of the farm subsidies if the economy wants to develop its technologically more advanced sectors with an adequate supply of foreign capital.

Suggested Citation

  • Sarbajit Chaudhuri, 2005. "Direct Foreign Investment In A Small Open Economy And Global Trade Liberalization In Agriculture: A Note," International Trade 0510012, EconWPA.
  • Handle: RePEc:wpa:wuwpit:0510012
    Note: Type of Document - pdf; pages: 9

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    References listed on IDEAS

    1. Motta, Massimo, 1992. "Multinational firms and the tariff-jumping argument : A game theoretic analysis with some unconventional conclusions," European Economic Review, Elsevier, vol. 36(8), pages 1557-1571, December.
    2. Chaudhuri, Sarbajit & Mukherjee, Ujjaini, 2002. "Removal of protectionism, foreign investment and welfare in a model of informal sector," Japan and the World Economy, Elsevier, vol. 14(1), pages 101-116, January.
    3. Manash Gupta, 1994. "Duty-free zone, unemployment, and welfare a note," Journal of Economics, Springer, vol. 59(2), pages 217-236, June.
    4. Bernard Hoekman & Kym Anderson, 2000. "Developing-Country Agriculture and the New Trade Agenda," Economic Development and Cultural Change, University of Chicago Press, vol. 49(1), pages 171-180.
    5. Chaudhuri, T. Datta & Adhikari, Smita, 1993. "Free trade zones with Harris-Todaro unemployment A note on Young-Miyagiwa," Journal of Development Economics, Elsevier, vol. 41(1), pages 157-162, June.
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    More about this item


    Liberalized trade policy in agriculture; foreign capital inflow; rate of return on foreign capital; fertilizer subsidy;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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