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Home country effects of foreign direct investment: From a small economy to a large economy

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  • Lee, Hsiu-Yun
  • Lin, Kenneth S.
  • Tsui, Hsiao-Chien
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    Abstract

    Previous studies on home country effects mainly focused on FDI from large developed economies to other countries. But today's super recipient is a relatively larger economy than its investors and many of these investors are not classified as "developed economies." A simple Ak type model implies that a small and more developed country investing in a large and less developed country will experience decreases in both employment and income disparity (compared to the recipient country) as the less-developed recipient country gains the higher technology of production through FDI inflows. The empirical results for the Four Tigers (source countries) and China (recipient country) are consistent with our theoretical model of FDI outflows. We also find that FDI outflows to China decrease the ratio of exports to GDP only for small source countries, even though a higher investment in China raises the share of these countries' exports-to-China to China's total imports.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 26 (2009)
    Issue (Month): 5 (September)
    Pages: 1121-1128

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    Handle: RePEc:eee:ecmode:v:26:y:2009:i:5:p:1121-1128

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    Web page: http://www.elsevier.com/locate/inca/30411

    Related research

    Keywords: Foreign direct investment Capital outflows Home country effects;

    References

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    Cited by:
    1. Bojnec, Štefan & Ferto, Imre, 2014. "Outward Foreign Direct Iinvestments and Merchandise Exports: The European OECD Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 87-99, June.

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