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Trade costs, wage rates, technologies, and reverse imports

Jota Ishikawa and Yoshimasa Komoriya

Canadian Journal of Economics, 2009, vol. 42, issue 2, 615-638

Abstract: This paper explores the effects of transport costs, tariffs, and foreign wage rates on the domestic economy in the presence of reverse imports, with special emphasis on inter-firm cost asymmetry in an international oligopoly model. To serve the domestic market, a foreign firm produces in the foreign country, while two domestic firms produce either at home or abroad. Surprisingly, an increase in the foreign wage rate may increase the profits of a firm producing in the foreign country. Even if all firms produce in the foreign country, an increase in the foreign wage rate may improve domestic welfare.

JEL-codes: F12 F21 F23 (search for similar items in EconPapers)
Date: 2009
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Handle: RePEc:cje:issued:v:42:y:2009:i:2:p:615-638