Trade versus Investment Liberalization

James Markusen

No 6231, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Despite several theoretical contributions and considerable informal empirical evidence" to the contrary, a notion that trade and investment are substitutes persists in trade policy" analysis. This paper considers the liberalization of commodity trade versus liberalization" allowing direct investment versus the two together. For a relatively skilled-labor-scarce" economy, I show that trade and investment liberalization are quite different together are in a sense complements. The intuition may be that direct investment provides such" a country with crucial inputs (knowledge-intensive producer services) without which the" country cannot effectively exploit its abundant factors in certain industries."

JEL-codes: F12 F23 (search for similar items in EconPapers)
Date: 1997-10
Note: ITI
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Citations: View citations in EconPapers (177)

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