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The Possibility of Welfare Gains with Capital Inflows in a Small Tariff‐Ridden Economy
Author(s) -
Sen Partha,
Ghosh Arghya,
Barman Abheek
Publication year - 1997
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/1468-0335.00082
Subject(s) - tariff , economics , imperfect competition , capital (architecture) , welfare , repatriation , small open economy , capital intensity , revenue , competition (biology) , monetary economics , international economics , market economy , microeconomics , human capital , finance , exchange rate , ecology , archaeology , biology , history
Capital inflows with full repatriation give rise to welfare improvement possibilities in a small tariff‐distorted economy when imperfect competition and increasing returns are allowed for in one sector of a two‐sector model. This is in contrast to the Brecher–Alejandro proposition that capital inflows with full repatriation are necessarily immiserizing for a small tariff‐ridden economy. We find that welfare gains chances are greater (a) the higher the expenditure share of the capital‐intensive differentiated good; (b) the lower the substitutability between brands; and (c) the lower the share of tariff revenue in national income.