THE COMPLEMENTARITY BETWEEN ENDOGENOUS PROTECTION AND DIRECT FOREIGN INVESTMENT

Laixun Zhao

Economics and Politics, 1996, vol. 8, issue 1, 61-72

Abstract: This paper studies the endogenous relationship between direct foreign investgment (DFI) and trade restriction. A domestic labor union interested in both employment and wages bargains with a foreign firm and lobbies against foreign imports. By endogeneizing the wage rate and incorporating resource‐using lobbying, we show that more DFI results in higher lobbying efforts and lower imports under fairly general conditions, i.e. a reversal of quid pro quo DFI. We also conduct comparative statics analysis on wages and lobbying efforts.

Date: 1996
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https://doi.org/10.1111/j.1468-0343.1996.tb00121.x

Related works:
Working Paper: The Complementarity between Endogenous Protection and Direct Foreign Investment (1995)
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