TARIFF JUMPING FOREIGN DIRECT INVESTMENT DECISION IN A QUALITY-DIFFERENTIATED MARKET

NCUIR > School of Management at National Central University > Department of Economics > journal & Dissertation > Item 987654321/51806

Please use this identifier to cite or link to this item: http://ir.lib.ncu.edu.tw/handle/987654321/51806

Title:	TARIFF JUMPING FOREIGN DIRECT INVESTMENT DECISION IN A QUALITY-DIFFERENTIATED MARKET
Authors:	Wang,KCA;Lin,CHA;Chiou,JR
Contributors:	經濟學系
Keywords:	INTERNATIONAL-TRADE;PRODUCT;COMPETITION;CHOICE;INNOVATION;RESTRAINTS;MONOPOLY;POLICY
Date:	2011
Issue Date:	2012-03-27 19:06:35 (UTC+8)
Publisher:	國立中央大學
Abstract:	Using a product differentiation model, this paper discusses the issue of transnational firms evading tariffs and investing directly in a host country (through foreign direct investment (FDI)). Where product quality is differentiated between foreign and host country firms and assuming a firm's quality requirement is a long-term strategy and is not affected by a foreign firm's trade decision, we obtain the following findings. First, whether or not a host country firm produces high or low quality products, raising the quality requirement for foreign products will increase the possibility of a foreign firm choosing FDI instead of exporting a product to the host country. Second, raising the quality requirement for domestic products will lower the possibility of foreign firms choosing FDI without regard to the product's quality. Finally, given a competitor in the host country, in FDI, a foreign high-quality product-producing firm has an advantage over a low-quality product-producing firm. We also find that even when firms' quality decisions are affected by a foreign firm's trade decision, most of the above results will still hold.
Relation:	PACIFIC ECONOMIC REVIEW
Appears in Collections:	[Department of Economics] journal & Dissertation

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