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

Kenji Fujiwara ()

No 132, Discussion Paper Series from 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.

Keywords: Trade liberalization; FDI liberalization; oligopoly; factor price. (search for similar items in EconPapers)
JEL-codes: F12 F13 F23 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2015-07, Revised 2015-07
New Economics Papers: this item is included in nep-int
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http://192.218.163.163/RePEc/pdf/kgdp132.pdf First version, 2015 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:132

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