Tariff Reductions under Foreign Factor Ownership

Marcelo Olarreaga

Canadian Journal of Economics, 1998, vol. 31, issue 4, 830-836

Abstract: In the presence of foreign factor ownership, the traditional welfare effects of tariff reforms have to be reconsidered to include income redistribution between national and foreign-owned factors. Jagdish N. Bhagwati and Richard A. Brecher (1980) showed that, when the relative amount of foreign-owned factors in the host country is sufficiently large to induce a change in the direction of the trade pattern, immiserizing tariff reductions may occur. Here it is shown that, in the mirror case when foreign-owned factors tend to promote the existing trade pattern (i.e., trade-promoting), similar results can be obtained. On the other hand, when foreign factors are trade substituting, tariff reductions cannot be immiserizing.

JEL-codes: F11 F13 (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (6)

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