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Gains from FDI inflows with incomplete information

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  • Razin, Assaf
  • Sadka, Efraim

Abstract

The paper develops an international macroeconomic model of FDI flows with a unique feature: a hands-on management ability to react in real time to changing economic environments. Anticipating this advantage, foreign direct investors can outbid other investors in a certain industry in which they specialize in the source country. The model can explain both two-way FDI flows among developed countries and one-way FDI flows from developed to developing country. The unique gains from FDI to the host country stem from the increased eciency of domestic investment.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 78 (2003)
Issue (Month): 1 (January)
Pages: 71-77

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Handle: RePEc:eee:ecolet:v:78:y:2003:i:1:p:71-77

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References

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  1. Razin, A. & Sadka, E. & Yuen, C.W., 1997. "Implications of the Home Bias: A Pecking Order of Capital Inflows and Corrective Taxation," Papers 32-97, Tel Aviv.
  2. Razin, A & Sadka, E & Yuen, C-W, 1997. "A Pecking Order of Capital Inflows and International Tax Principles," Papers 12-97, Tel Aviv - the Sackler Institute of Economic Studies.
  3. R Portes & H Rey, 2000. "The Determinants Of Cross-Border Equity Flows," CEP Discussion Papers dp0446, Centre for Economic Performance, LSE.
  4. Oliver Hart, 2001. "Financial Contracting," Harvard Institute of Economic Research Working Papers 1924, Harvard - Institute of Economic Research.
  5. Bovenberg, A.L. & Gordon, R.H., 1996. "Why is capital so immobile internationally? Possible explanation and implications for capital income taxation," Open Access publications from Tilburg University urn:nbn:nl:ui:12-73564, Tilburg University.
  6. Gopinath, Gita, 2004. "Lending booms, sharp reversals and real exchange rate dynamics," Journal of International Economics, Elsevier, vol. 62(1), pages 1-23, January.
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Cited by:
  1. Goldstein, Itay & Razin, Assaf, 2003. "An Information-Based Trade-off Between Foreign Direct Investment and Foreign Portfolio Investment: Volatility, Transparency and Welfare," CEPR Discussion Papers 3747, C.E.P.R. Discussion Papers.
  2. Itay Goldstein & Assaf Razin, 2005. "An Information-Based Trade Off between Foreign Direct Investment and Foreign Portfolio Investment," NBER Working Papers 11757, National Bureau of Economic Research, Inc.
  3. Koralai Kirabaeva & Assaf Razin, 2011. "Composition of International Capital Flows: A Survey," Working Papers 142011, Hong Kong Institute for Monetary Research.
  4. Michael Dooley & David Folkerts-Landau & Peter Garber, 2005. "Direct investment, rising real wages and the absorption of excess labor in the periphery," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
  5. Mody, Ashoka & Razin, Assaf & Sadka, Efraim, 2002. "The Role of Information in Driving FDI: Theory and Evidence," CEPR Discussion Papers 3619, C.E.P.R. Discussion Papers.
  6. Assaf Razin, 2003. "FDI Contribution to Capital Flows and Investment in Capacity," Working Papers 052003, Hong Kong Institute for Monetary Research.
  7. Hasanat Shah, Syed & He, Bin & Li, Junjiang, 2011. "The Causality and Economic Impact of FDI inflows from Trade Partners in Pakistan," MPRA Paper 35645, University Library of Munich, Germany.
  8. Razin, Assaf & Sadka, Efraim, 2007. "Corporate transparency, cream-skimming and FDI," European Economic Review, Elsevier, vol. 51(5), pages 1263-1276, July.
  9. Itay Goldstein & Assaf Razin, 2005. "Foreign Direct Investment vs. Foreiegn Portfolio Investment," NBER Working Papers 11047, National Bureau of Economic Research, Inc.

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