For a small tariff-imposing country, within the standard two-commodity two-factor model of international trade, this paper reconsiders the implications of an inflow of capital from abroad. When the host country continues to import the capital-intensive good while remaining incompletely specialized, the analysis shows that the capital inflow must reduce host-country welfare, assuming that the foreign capital receives the full (untaxed) value of its marginal product. Under other circumstances considered, however, the inflow may have different consequences for welfare.
Journal of International Economics
Department of Economics

Brecher, R.A, & Diaz Alejandro, C.F. (Carlos F.). (1977). Tariffs, foreign capital and immiserizing growth. Journal of International Economics, 7(4), 317–322. doi:10.1016/0022-1996(77)90048-4