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Title: |
Regional Integration, Foreign Investment, and Optimal Trade and
Investment Policies |
| Author: |
Tsai, Pan-Long |
| Author
Affiliation: |
National Tsing
Hua U |
| Source: |
International Economic Journal, Spring 1999, v. 13, no. 1, pp. 1-18 |
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Publication Date: |
Spring 1999 |
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Abstract: |
Using an international duopoly model, this
paper first investigates the impacts of the formation of a North-South
regional integration (RI) on both the developed member country and the
developing nonmember country. The RI is shown indeed to have trade
diversion effect and to depress the welfare of the nonmember country. It
then derives explicitly the conditions under which the nonmember
exporting firm will make EDI into the economic region after its
formation. The optimal trade and investment policies of the nonmember
country after the RI are shown to be export subsidies no matter there is
FDI or not. Moreover, in the cast with FDI, the nonmember country should
subsidize the export and the FDI of its firm equally. |
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