Export,FDI and the welfare gains from trade liberalization |
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| Affiliation: | 1. Department of Economics, Nankai University, China;2. School of International Economics & Trade, Nanjing University of Finance and Economics, China;1. LAMIDED, University of Sousse, Abdlaaziz il Behi Street, Bp 763, 4000, Sousse, Tunisia;2. Léonard de Vinci Pôle Universitaire, Research Center, 92916, Paris La Défense (France) and IRG, University of Paris-Est, IRG, France;1. Economics Department, University of Girona, Carrer de la Universitat, 10. Campus de Montilivi, 17003 Girona, Spain;2. Applied Economics Department, Autonomous University of Barcelona, 08193, Bellaterra, Barcelona, Spain;1. Additional Commissioner of Taxes, National Board of Revenue of Bangladesh, Bangladesh;2. Department of Economics, Monash University, Melbourne, VIC, 3800, Australia;1. Banco de Portugal, Portugal;2. Banco de Portugal, Nova SBE, Portugal;1. School of Economics, Huazhong University of Science and Technology, 1037# Luoyu Road, Wuhan, Hubei, 430074, China;2. School of Accounting, Zhongnan University of Economics and Law, 182# Nanhu Avenue, Wuhan, Hubei, 430073, China |
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| Abstract: | This paper extends Melitz and Redding (2015) to analyze the welfare gains from trade liberalization by adding foreign direct investment(FDI). Our model predicts that with FDI activities, welfare gains from trade liberalization will be strictly lower than those in a model without FDI, but only takes exports into account. In addition, the calibrated model indicates that with FDI activities, aggregate welfare reaches its maximum when the fixed export costs are positive rather than 0. Furthermore, we decompose the welfare gains induced by trade liberalization from continuing exporters, and switchers. The results show that in any case, with or without FDI, continuing exporters contribute a larger share to welfare gains than status switching firms. |
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| Keywords: | FDI Welfare gains Trade liberalization F12 F13 F41 |
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