Strategic Quotas on Foreign Investment and Migration
Posted: 6 Nov 2006
A basic two-country, single commodity model is considered to formulate the interactive and retaliative policies with regard to restrictions on foreign investment and labor migration. We model quota retaliations using the contingent threat situation. Under three different strategic environments, we characterize the stable quotas on factor movements. Among other things, we illustrate that either one of the two countries may end up with welfare loss- Ramaswami trap, a concept we introduce in this paper.
Keywords: Foreign investment, migration, labor and capital mobility, theory of social situations
JEL Classification: F21, F22, C72
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