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Trade Policies and FDI with an Endogenous Market Structure

  • Chih-Yi Hsu , Hong Hwang , Yan-Shu Lin and Cheng-Hau Peng EMAIL logo
Published/Copyright: February 22, 2023

Abstract

Given an endogenous market structure, this research investigates the effects of tariff and equivalent quota policies on foreign firms’ FDI decisions. Findings show that foreign firms have symmetric (asymmetric) decisions in terms of FDI versus export under a tariff (quota) policy. Furthermore, FDI is more likely to occur under the tariff than the quota regime, but the former is definitely more (less) desirable than the latter in terms of domestic (world) welfare. Finally, a more cost-efficient firm is more likely to engage in FDI under either the tariff or the quota regime.

JEL Classification: F12; F13

Corresponding author: Cheng-Hau Peng, Department of Economics, Fu Jen Catholic University, New Taipei City 242, Taiwan, E-mail:

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Received: 2022-07-01
Accepted: 2023-02-09
Published Online: 2023-02-22

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