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Simulation scenario 3
Trade liberalization could promote Foreign Direct Investment (FDI) (Brown and Stern, 2001;
NhuBinh and Haughton, 2002). By improving institutions and thusthe climate for doing
business,AFTA may result in Laos in increased Foreign Direct Investment (FDI).We assume
that the FDI inflow will increase by about 15%
21
.
Simulation scenario 4
Simulation scenario 4combines simulations 1 through 3 as an overall simulation of the
impacts of AFTA on the Lao economy.
21
We will shock qo("Capital", REG) is the variable for capital endowment and it is set as exogenous under the
standard GTAP model.
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