Answer to Question #132559 in Microeconomics for Neba

Question

Give examples of barriers to factor mobility in case of domestic trade, factor mobility in case of foreign trade and compare the degree of their effect on factor mobility.

Answer 1

Barriers to factor mobility in case of domestic trade:

• government control on how firms conduct production, distribution 

• corruption and bribery, which stagnate economy and discourage investment 

• environmental laws, that affect employment and economic development

Barriers to factor mobility in case of foreign trade:

• tariffs

• non-tariff barriers to trade, such as import/export licenses, quotas

• government regulation on immigration

• foreign investment laws, that can restrict FDI (foreign direct inverstment) in certain industries

• contract laws, that are used for example in franchising or licensing, it can prohibit a firm to use intellectual property of other company abroad