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Trade and FDI Liberalization in an Oligopolistic Model: Partial versus General Equilibrium Effects

Author

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  • Kenji Fujiwara

    (School of Economics, Kwansei Gakuin University)

Abstract

This paper studies the effects of liberalization of trade and foreign direct investment (FDI) in a model where multiple oligopolistic sectors compete for a common factor. In contrast to the case of a fixed factor price, trade liberalization is shown to improve the host country’s welfare by benefiting the consumers and firms while the opposite applies to FDI liberalization. Then, we find that simultaneous liberalization of trade and FDI improves world welfare since the positive effect of trade liberalization dominates the negative effect of FDI liberalization. This result suggests that trade liberalization must be accommodated in order to promote FDI liberalization.

Suggested Citation

  • Kenji Fujiwara, 2015. "Trade and FDI Liberalization in an Oligopolistic Model: Partial versus General Equilibrium Effects," Discussion Paper Series 132, School of Economics, Kwansei Gakuin University, revised Jul 2015.
    • Handle: RePEc:kgu:wpaper:132
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    References listed on IDEAS

    as
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    6. Ignatius J. Horstmann & James R. Markusen, 2021. "Endogenous market structures in international trade (natura facit saltum)," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 2, pages 25-45, World Scientific Publishing Co. Pte. Ltd..
    7. Antrà s, Pol & Yeaple, Stephen R., 2014. "Multinational Firms and the Structure of International Trade," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 55-130, Elsevier.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Trade liberalization; FDI liberalization; oligopoly; factor price.;
    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
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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