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Bilateral versus Multilateral Trade and Investment Liberalisation

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  • Peter Egger
  • Mario Larch
  • Michael Pfaffermayr

Abstract

To assess the welfare effects of bilateral versus multilateral trade and/or investment liberalisation in general equilibrium, we set up a three‐country and three‐factor knowledge‐capital model of trade and multinational activity. Numerical simulation results indicate that multilateral liberalisation tends to dominate bilateral liberalisation in welfare terms. A transition economy tends to prefer bilateral over multilateral liberalisation to avoid plant relocation. For similar reasons, a developed country may prefer bilateral over multilateral liberalisation, if the other economies exhibit big relative factor endowment differences.

Suggested Citation

  • Peter Egger & Mario Larch & Michael Pfaffermayr, 2007. "Bilateral versus Multilateral Trade and Investment Liberalisation," The World Economy, Wiley Blackwell, vol. 30(4), pages 567-596, April.
    • Handle: RePEc:bla:worlde:v:30:y:2007:i:4:p:567-596
    DOI: 10.1111/j.1467-9701.2007.01005.x
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    References listed on IDEAS

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    1. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, April.
    2. Karolina Ekholm & Rikard Forslid & James R. Markusen, 2021. "Export-Platform Foreign Direct Investment," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 6, pages 111-130, World Scientific Publishing Co. Pte. Ltd..
    3. Keiko Ito & Kyoji Fukao, 2005. "Physical and Human Capital Deepening and New Trade Patterns in Japan," NBER Chapters, in: International Trade in East Asia, pages 7-52, National Bureau of Economic Research, Inc.
    4. James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
    5. Egger, Peter & Larch, Mario & Pfaffermayr, Michael, 2007. "On the welfare effects of trade and investment liberalization," European Economic Review, Elsevier, vol. 51(3), pages 669-694, April.
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    Cited by:

    1. Egger Peter & Wamser Georg, 2013. "Effects of the Endogenous Scope of Preferentialism on International Goods Trade," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(2), pages 709-731, July.
    2. Peter Egger & Alain Pirotte & Catharine Titi, 2023. "International investment agreements and foreign direct investment: A survey," The World Economy, Wiley Blackwell, vol. 46(6), pages 1524-1565, June.
    3. Peter Egger & Georg Wamser, 2011. "Der Nutzen unterschiedlicher Arten von internationalen Wirtschaftsabkommen," KOF Analysen, KOF Swiss Economic Institute, ETH Zurich, vol. 5(2), pages 63-72, June.
    4. Fritz Breuss, 2010. "Globalisation, EU enlargement and income distribution," International Journal of Public Policy, Inderscience Enterprises Ltd, vol. 6(1/2), pages 16-34.
    5. repec:wsr:wpaper:y:2007:i:008 is not listed on IDEAS

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