Common Market for Eastern and Southern Africa (comesa). This saves time as workers are doing the same job, which will increase efficiency and the total output. Theoretically, a depreciation of real exchange rate will increase FDI inflows and vice-versa. SSC help to expand market size, improve infrastructure and educational level to gain more skilled labour in the future and also help in political and social issues (Lewis, 1980; Antweiler and Trefler, 2002). Similarly USA can export 30 Y units for 30 X units from UK, which leads to both countries moving. Also with Canada's export mainly being resources-based, it creates an off balance where less secondary industries or manufacturing industries. Vertically motivated regional FDI (efficiency and natural resource seeking FDI) 15 split up the production process across borders to exploit gains from comparative advantage within the firm. The first and also more obvious is an increase in level of capital. In a domestic market, equilibrium will be at point. It means the number of units of resources required to produce a good (tea or juice) will remain constant irrespective of level of production on the Tea PPF.
Employment: The two theories assume that available resources are fully employed. Underlying this result is the concept of opportunity cost, which means that countries have a comparative advantage in industries that they are relatively or comparatively best. Literatures which also took into account natural resources as a determinant of FDI include Warner and Sachs (1999 Asiedu and Esfahani (2001) and the World development Indicators 2009.
This is true for the two reasons. 2.4.7 Government Policies, Taxes Tariffs And FDI Government can play a crucial role in stimulating foreign investment and is considered an efficiency-seeking determinant of FDI. To come back to China, its attractiveness is a result of lower labor costs that still exist and good infrastructure.
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Similarly, previous researchers (such as Habib Zurawicki, 2002 and Al-Sadig, 2009) predict that corruption scares away foreign investors because it is considered illegal, and because it leads to operational inefficiency. The variables that are used in this study were real wage rates, interest rates, foreign exchange rates, openness, liberalization, current market size (GDP market growth, human capital, export oriented policy. To specialize, UK would have to move along the curve till it reaches the specialization point. Other scholars empirical study presented as follow. Nello (2009) Consumer surplus is the difference between the price that a consumer is prepared to pay for a certain quantity of a product and the price that is effectively paid for that quantity. More on tariff and protectionism is explained later in the essay. Economies of scale generate increased returns due to declining units of production costs and as a result the output rises. In year 2000, Canada's exports are 32 billions more than imports which mean more money will flow into the country. The diagram below can be used to explain how trade can benefit from economies of scale. They came to the conclusion that benefits arise from the fact that foreign firms bring new technologies and they train local workers who can be later employed by domestic producers. Therefore, the net welfare gain loss from the tariff is abcd AB that is equal. The East African Community, largely supported by the developed countries, aims to ease transportation of labor, capital and goods inside East Africa and maybe regulates monetary affairs in the future (East African Community, 2012).
The theory of combative advantage is one of the best points that illustrates how free trade can improve productivity.
Theory of comparative advantage : The theory provides a basis for explaining and justifying international trade in a model world assumed to enjoy free trade, perfect competition, no uncertainty, costless information, and no government interference.
Limitations of comparative advantage:.
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