Technology Diffusion and Trade Liberalization

Hamid Beladi and Reza Oladi

The B.E. Journal of Economic Analysis & Policy, 2017, vol. 17, issue 2, 15

Abstract: We consider a developing economy where multinational corporations compete with foreign and local firms in a monopolistically competitive market. The focus of our paper is on consequences of a policy mix of tariffs and foreign direct investment (FDI) tax in a developing economy. We assume all firms are technologically heterogeneous and that foreign firms are technologically superior to local firms. Central to our model is the assumption that FDI activities by multinational corporations would lead to diffusion of technology in the developing economy. We show the existence of a non-trivial equilibrium where most technologically advanced foreign firms emerge as multinationals, engage in FDI activities and this in turn leads to the diffusion of technology. We also show that trade liberalization without liberalization of foreign investment may lead to the protection of most technological backward local firms in the developing economy and such liberalization can reduce the welfare of a representative consumer.

Keywords: foreign direct investment; technology diffusion; liberalization (search for similar items in EconPapers)
JEL-codes: F12 F13 F23 L13 O33 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/bejeap-2016-0075 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejeap:v:17:y:2017:i:2:p:15:n:4

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejeap/html

DOI: 10.1515/bejeap-2016-0075

Access Statistics for this article

The B.E. Journal of Economic Analysis & Policy is currently edited by Hendrik Jürges and Sandra Ludwig

More articles in The B.E. Journal of Economic Analysis & Policy from De Gruyter
Bibliographic data for series maintained by Peter Golla ().