Multilateral trade liberalisation, foreign direct investment and the volume of world trade

A Cournot duopoly model is used to explain the paradox that multilateral trade liberalisation has resulted in increases in both the volume of world trade and the amount of foreign direct investment (FDI). ► Multilateral trade liberalisation increased both world trade and FDI is a paradox. ► A Courno...

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Bibliographic Details
Published in:Economics letters 2011-10, Vol.113 (1), p.47-49
Main Author: Collie, David R.
Format: Article
Language:English
Subjects:
Cournot oligopoly
Duopoly
Economic models
Foreign direct investment
Foreign investment
Multilateral trade
Studies
Trade liberalisation
Trade liberalisation Foreign direct investment Cournot oligopoly
Trade liberalization
Trade volume
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Summary:A Cournot duopoly model is used to explain the paradox that multilateral trade liberalisation has resulted in increases in both the volume of world trade and the amount of foreign direct investment (FDI). ► Multilateral trade liberalisation increased both world trade and FDI is a paradox. ► A Cournot duopoly model with two regions and four countries is used to explain the paradox. ► Firms may shift from exporting to FDI when the inter-regional trade cost is high. ► The volume of world trade in the industry also increases.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2011.05.032