DIRECT FOREIGN-INVESTMENT AND WELFARE IN THE TRANSFORMING ECONOMIES -THE CASE OF CENTRAL-ASIA

This paper studies the welfare effects of foreign investment into an e conomy with a trade regime of export taxes and/or import subsidies. Th is regime is characteristic of the Central Asian economies but has rec eived no consideration in previous literature. We show that in many ci rcumstances, foreign investment into an economy with a Central-Asian-t ype trade regime reduces welfare. In particular, we find that foreign investment is most likely to immiserize when it is directed toward non distorted traded sectors or free trade zones. (C) 1997 Academic Press.