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Licensing of New Technology Versus Direct Foreign Investment: A General Equilibrium Analysis
Author(s) -
Miyagiwa Kaz,
Young Leslie
Publication year - 1997
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.00035
Subject(s) - economics , foreign direct investment , capital (architecture) , general equilibrium theory , investment (military) , international economics , macroeconomics , partial equilibrium , capital good , monetary economics , international trade , microeconomics , archaeology , public good , politics , political science , law , history
In a general equilibrium model with sector‐specific capital, a country which licenses new technology and imports capital itself would have lower national income than if it permitted direct investment by foreigners with rights to the technology. However, the reverse can be true if capital is mobile between sectors. Thus, licensing is a poor policy in the short run but can be a good policy in the long run.