Warning message

CEPR.org and portal.cepr.org will be unavailable between 22:00-22:30 GMT on the 16th September 2019 due to maintenance.

DP2526 | Trade, FDI and Congestion - the Small and very Open Economy

Author(s)

Publication Date

29/08/2000

JEL Code(s)

Keyword(s)

Programme Area(s)

Abstract

Typically, a small and open economy trades goods at given world prices. Here, we present a model of a very open small economy, where capital and labour are internationally mobile, too. When investing into infrastructure, the economy?s government attracts not only mobile capital but mobile labour, too. These capital and labour inflows into the economy reinforce each other. They contribute to rising welfare for land owning indigenous households. But all potential benefits for land renting immigrant households are capitalized into higher land rents. The paper is also an attempt to give an account of the recent economic boom in Ireland.