Direct Investment Liberalization,Commodity Trade and Income Distribution: What Can the WTO do?

This paper analyzes a model of two-way movement of physical capital, and examines the effects of direct investment liberalization on resource allocation, income distribution and commodity trade. If either country or both countries liberalizes investment under exogenously given commodity prices, some factor owners in a country will gain but some others will lose. If capital movement affects commodity prices, all factor owners in a country may be better off after multilateral investment liberalization. In these cases, it will be much easier for the home country to sign an agreement liberalizing investment flows.     

Growth of Hong Kong Before and After its Reversion to China: The China Factor

The paper focuses on the Hong Kong economy and attempts to measure the contribution of Hong Kong's integration with mainland China to its GDP growth rate. Two linkages have received particular attention, namely, Hong Kong's foreign direct investment (FDI) in China and immigrants from China. While the former is assumed to stimulate capital investment in Hong Kong but at the same time to reduce human capital formation (owing to a shrinkage of its domestic manufacturing sector), the latter is assumed to further reduce Hong Kong's average human capital because immigrants tend to be less educated. By making some assumptions about the future trajectories of Hong Kong direct investment in China and Chinese immigrants into Hong Kong after its reversion to China, the paper offers some predictions about Hong Kong's future economic growth.     

Housing Market Bubbles and the Currency Crisis: The Case of Thailand

This paper explains with a simple model the collapse of the housing market in Thailand before the 1997 economic crisis. It shows that successive periods of impressive growth of the economy created not only higher demands for housing, but also an increase in people's optimism about market conditions in the future. Both oversupply and bubbles were formed before the market finally crashed. The model explains some of these phenomena, and describes the nature of the bubbles. An ironic possibility is that a faster and more persistent growth of the economy tends to increase the vulnerability of the firms in the market.JEL Classification Numbers: F14, O11, O53.     

GRADUAL TRADE LIBERALIZATION WITH SLUGGISH CAPITAL MOVEMENT

Abstract.  This paper analyses how domestic sluggish capital movement can affect multilateral trade negotiations between countries. In multilateral trade talks, including the current Doha Round of trade talks organized by the World Trade Organization, countries take steps to liberalize even though they seem to be moving towards the ultimate free trade equilibrium. This paper argues that when capital moves sluggishly between sectors in an economy, there are cases in which countries do not want to move to the ultimate free trade equilibrium immediately. Instead, they find it more beneficial if they simultaneously move gradually, with their tariffs lowered step by step.     

Gains from Trade with Lump-sum Compensation

This paper analyses the use of lump-sum compensation to ensure a Pareto improvement under free trade. It first shows how households, which are aware of the free-trade and compensation policy, may falsify autarkic consumption to get larger transfers. Despite consumption falsification, however, trade could still be gainful using lump-sum compensation under certain conditions. This paper also suggests a case in which an incentive-compatible lump-sum compensation scheme exists.