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Trade Policies and FDI with an Endogenous Market Structure

Author

Listed:
  • Hsu Chih-Yi

    (Department of Economics, National Dong Hwa University, Hualien, Taiwan)

  • Hwang Hong

    (Department of Economics, National Taiwan University, Taipei, Taiwan)

  • Lin Yan-Shu

    (Department of Economics, National Dong Hwa University, Hualien, Taiwan)

  • Peng Cheng-Hau

    (Department of Economics, Fu Jen Catholic University, New Taipei City, Taiwan)

Abstract

Given an endogenous market structure, this research investigates the effects of tariff and equivalent quota policies on foreign firms’ FDI decisions. Findings show that foreign firms have symmetric (asymmetric) decisions in terms of FDI versus export under a tariff (quota) policy. Furthermore, FDI is more likely to occur under the tariff than the quota regime, but the former is definitely more (less) desirable than the latter in terms of domestic (world) welfare. Finally, a more cost-efficient firm is more likely to engage in FDI under either the tariff or the quota regime.

Suggested Citation

  • Hsu Chih-Yi & Hwang Hong & Lin Yan-Shu & Peng Cheng-Hau, 2023. "Trade Policies and FDI with an Endogenous Market Structure," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 23(2), pages 423-442, April.
    • Handle: RePEc:bpj:bejeap:v:23:y:2023:i:2:p:423-442:n:2
    DOI: 10.1515/bejeap-2022-0240
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    More about this item

    Keywords

    endogenous market structure; FDI; tariff; equivalent quota;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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