Welfare Effects of Liberalizing Trade in a Service Industry, Intellectual Property Rights and Forming Free Trade Agreements

• Main Authors: Te-Cheng Lu, 呂得成
• Other Authors: Yan-Shu Lin
• Format: Others
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/44893528105750003291

博士 === 國立東華大學 === 經濟學系 === 103 === The thesis analyzes three important issues in the conduct of trade theory. Chapter 2 investigates welfare effects of liberalizing trade and investment in a service sector. Chapter 3 explores the optimal trade or intellectual property rights (IPRs) policy with endogenous entry mode and R&;D investment in the presence of bilateral R&;D spillover. Chapter 4 discusses stable formation of free trade agreements among asymmetric countries. The first model (Chapter 2) examines a foreign firm’s entry decision and its effects on the host country’s welfare in a model with a composite good in which both commodity and service generate utility for consumers. Along with the commodity that it produces, a producer can provide the service by itself or outsource the service. The result shows that the incentive for foreign direct investment (FDI) in the service sector increases under liberalizing trade in the final good market. Moreover, there exist policy combinations of trade and investment liberalization, whereby the domestic firms’ profitability is traded off with the host country’s social welfare when the foreign firm provides a service through FDI or through outsourcing respectively. Finally, the welfare in the outsourcing regime after simultaneously liberalizing trade and investment is not necessarily greater than that under autarky. The second model emploies a bilateral R&;D spillover model to analyze how a domestic country coordinates polices encompassing IPRs and trade and then investigates the optimal choices corresponding to the foreign firm’s behavior: export (EX) or FDI. The domestic government and foreign firm’s preferences are consistent in some combinations of trade and IPRs policies. Under the EX regime the domestic country should keep tariffs as high as possible, which will increase with IPRs protection. Under the FDI regime the domestic country can find an optimal IPRs policy that is different from the corner solution in some conventional results. Therefore, the strict enforecment of IPRs protection may results in a welfare reducing R&;D. The third model constructs a three-country intra-industry trade model with asymmetric cost firms to analyze the welfare effects under free trade agreements on the basis of the most-favored-nation (MFN) clause. A cost-efficient (cost-inefficient) FTA member imposes a high (low) external tariff on the same non-member country. The formation of FTAs acts as a building block toward global free trade if the difference in cost efficiency relative to market size is sufficiently low, while the other Coalition-Proof Nash Equilibria (CPNE) are FTAs among asymmetric countries. Free trade agreements among asymmetric countries {A, B}, {B, C}, and {A, C} are stable if the difference in cost efficiency is moderate; If the difference in cost efficiency is sufficiently high, free trade agreement between the cost-efficient and cost-inefficient countries {A, C} is not a CPNE.