This paper examines the effect on national welfare of an endogenously determined inflow of foreign capital, in the context of a well-known model with sector-specific inputs, both for the case of unrestricted international trade and investment and in the presence of a tariff. The second-best problem of the optimal tax on foreign investment for a given tariff level is also investigated, by application of the concept of shadow prices for primary factors in distorted open economies. The results obtained are then related to analogous propositions derived previously for the standard Heckscher-Ohlin model.
Journal of International Economics
Department of Economics

Brecher, R.A, & Findlay, R. (Ronald). (1983). Tariffs, foreign capital and national welfare with sector-specific factors. Journal of International Economics, 14(3-4), 277–288. doi:10.1016/0022-1996(83)90005-3