Academic Commons

Articles

National Welfare in an Open Economy in the Presence of Foreign-owned Factors of Production

Bhagwati, Jagdish N.; Brecher, Richard A.

In the presence of foreign-owned factors of production in the economy, the effect of trade policy changes on national welfare needs to take into account the possible redistributive effect between foreign-owned and domestic factors. Therefore, an otherwise welfare-improving trade liberalization may paradoxically worsen national welfare. This paper analyzes this important, new area of trade theory and establishes the condition under which this paradox of immiserizing trade liberalization arises. The analysis is also applicable to analyzing the effects of external tariff variation in customs unions, with full internal factor mobility, on member countries' welfare.

Subjects

Files

Also Published In

Title
Journal of International Economics
DOI
https://doi.org/10.1016/0022-1996(80)90034-3

More About This Work

Academic Units
Economics
Published Here
January 31, 2013
Academic Commons provides global access to research and scholarship produced at Columbia University, Barnard College, Teachers College, Union Theological Seminary and Jewish Theological Seminary. Academic Commons is managed by the Columbia University Libraries.