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Comparing Sectoral FDI Incentives: Comparative Advantages and Market Opportunities

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Author Info

  • Larry D. Qiu

    ()
    (Department of Economics, Hong Kong University of Science & Technology)

Abstract

In this paper we closely examine the implications of comparative advantage for foreign direct investment (FDI) incentives. Particularly, we find that the host country¡¯s comparative advantage sector is more attractive to inward FDI than its comparative disadvantage sector. This finding is supported by empirical evidence. However, such a cross-sector FDI comparison has not been studied, theoretically and explicitly, in the literature. This paper contributes to the literature by filling this gap. We have also obtained some other results such as how the degrees of comparative advantage and absolute advantage affect FDI incentives, and whether a multinational corporation (MNC) should allow its foreign subsidiary to be run independently.

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Bibliographic Info

Article provided by Society for AEF in its journal Annals of Economics and Finance.

Volume (Year): 4 (2003)
Issue (Month): 1 (May)
Pages: 151-176

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Handle: RePEc:cuf:journl:y:2003:v:4:i:1:p:151-176

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Related research

Keywords: Foreign direct investment (FDI); Multinational corporation (MNC); Comparative advantage; Absolute advantage; Market opportunity; FDI incentives;

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References

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  1. Ethier, Wilfred J, 1986. "The Multinational Firm," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 805-33, November.
  2. V N Balasubramanyam & V Mahambare, 2003. "Foreign direct investment in India," Working Papers 539987, Lancaster University Management School, Economics Department.
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  12. Baldwin, Robert E, 1979. "Determinants of Trade and Foreign Investment: Further Evidence," The Review of Economics and Statistics, MIT Press, vol. 61(1), pages 40-48, February.
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Cited by:
  1. Lin, Mi & Kwan, Yum K., 2010. "Sectoral Location of FDI in China," MPRA Paper 27088, University Library of Munich, Germany.
  2. John C. Anyanwu, 2012. "Why Does Foreign Direct Investment Go Where It Goes?: New Evidence From African Countries," Annals of Economics and Finance, Society for AEF, vol. 13(2), pages 425-462, November.

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