Comparing Sectoral FDI Incentives: Comparative Advantages and Market Opportunities
AbstractIn 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 InfoArticle provided by Society for AEF in its journal Annals of Economics and Finance.
Volume (Year): 4 (2003)
Issue (Month): 1 (May)
Foreign direct investment (FDI); Multinational corporation (MNC); Comparative advantage; Absolute advantage; Market opportunity; FDI incentives;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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