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Discussion Papers In Economics And Business.20-08 P.1-P.36

Tariffs and Foreign Direct Investment in a North–South Product Cycle Model

Graduate School of Economics and Osaka School of International Public Policy (OSIPP) Osaka University

英語

2020-04-30

http://hdl.handle.net/11094/75895

This paper theoretically examines how import tariffs by a developed country (the North) and a developing country (the South) affect innovation, foreign direct investment (FDI), wages,and welfare using a North–South quality ladder model. We show that a Northern import tariff raises the relative wage of Northern labor to Southern labor, but impedes innovation and FDI. Because of the decrease in innovation and increased prices, this may worsen Northern welfare. By contrast, a Southern import tariff raises the relative wage of Southern labor to Northern labor and promotes innovation and FDI. As a result, it can improve Southern welfare. These results imply that the North has a weaker incentive than the South to impose an import tariff, and this is consistent with actual experience.

Tariffs and Foreign Direct Investment in a North–South Product Cycle Model

Graduate School of Economics and Osaka School of International Public Policy (OSIPP) Osaka University

英語

2020-04-30

Discussion Papers In Economics And Business

20-08

1

36

http://hdl.handle.net/11094/75895