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Facts And Fallacies About Foreign Direct Investment

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  • Robert C. Feenstra

Abstract

This paper begins with a summary of the major trends in foreign direct investment over the 1980-1995 period. Following that we present five fallacies, dealing with: the magnitude of foreign investment in Japan; the impact of FDI on the U.S. and Japanese trade balance; the extent to with multinational corporations control U.S. trade; the impact of exchange rate movements on foreign investment flows; and finally, the impact of FDI on welfare of the host country. The paper concludes with a further analysis of the recent trends in foreign investment, and their implications for the competition faced by U.S. firms on international markets.

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Bibliographic Info

Paper provided by California Davis - Department of Economics in its series Department of Economics with number 98-04.

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Handle: RePEc:fth:caldec:98-04

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Postal: University of California Davis - Department of Economics. One Shields Ave., California 95616-8578
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Web page: http://www.econ.ucdavis.edu/
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References

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  1. Bruce A. Blonigen & Robert C. Feenstra, . "Protectionist Threats And Foreign Direct Investment," Department of Economics 96-01, California Davis - Department of Economics.
  2. Fukunari Kimura & Robert E. Baldwin, 1998. "Application of a Nationality-Adjusted Net Sales and Value- Added Framework: The Case of Japan," NBER Chapters, in: Geography and Ownership as Bases for Economic Accounting, pages 49-82 National Bureau of Economic Research, Inc.
  3. Aitken, B. & Hanson, G.H. & Harrison, A.E., 1994. "Spillovers, Foreign Investment and Export Behavior," Papers 95-06, Columbia - Graduate School of Business.
  4. Deborah L. Swenson, 1993. "Foreign Mergers and Acquisitions in the United States," NBER Chapters, in: Foreign Direct Investment, pages 255-284 National Bureau of Economic Research, Inc.
  5. David E. Weinstein, 1996. "Foreign Direct Investment and Keiretsu: Rethinking U.S. and Japanese Policy," NBER Working Papers 5612, National Bureau of Economic Research, Inc.
  6. Lipsey, Robert E. & Blomström, Magnus & Ramstetter, Eric, 1995. "Internationalized Production in World Output," Working Paper Series in Economics and Finance 80, Stockholm School of Economics.
  7. Blonigen, Bruce A, 1997. "Firm-Specific Assets and the Link between Exchange Rates and Foreign Direct Investment," American Economic Review, American Economic Association, vol. 87(3), pages 447-65, June.
  8. Barrell, Ray & Pain, Nigel, 1999. "Trade restraints and Japanese direct investment flows," European Economic Review, Elsevier, vol. 43(1), pages 29-45, January.
  9. Goodman, John B. & Spar, Debora & Yoffie, David B., 1996. "Foreign direct investment and the demand for protection in the United States," International Organization, Cambridge University Press, vol. 50(04), pages 565-591, September.
  10. Kenneth A. Froot & Jeremy C. Stein, 1992. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," NBER Working Papers 2914, National Bureau of Economic Research, Inc.
  11. J. Hatzius, 1997. "Foreign direct investment," LSE Research Online Documents on Economics 20351, London School of Economics and Political Science, LSE Library.
  12. Tyson, Laura D' Andrea, 1991. "They Are Not Us: Why American Ownership Still Matters," UCAIS Berkeley Roundtable on the International Economy, Working Paper Series qt63k3x1r7, UCAIS Berkeley Roundtable on the International Economy, UC Berkeley.
  13. Robert E. Lipsey, 1994. "Foreign-Owned Firms and U.S. Wages," NBER Working Papers 4927, National Bureau of Economic Research, Inc.
  14. Aitken, B. & Harrison, A. & Lipsey, R.E., 1995. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela, and the United States," Papers 95-21, Columbia - Graduate School of Business.
  15. Bhagwati, Jagdish N & Dinopoulos, Elias & Wong, Kar-yiu, 1992. "Quid Pro Quo Foreign Investment," American Economic Review, American Economic Association, vol. 82(2), pages 186-90, May.
  16. Brecher, Richard A. & Diaz Alejandro, Carlos F., 1977. "Tariffs, foreign capital and immiserizing growth," Journal of International Economics, Elsevier, vol. 7(4), pages 317-322, November.
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Cited by:
  1. Pol Antras, 2004. "Incomplete Contracts and the Product Cycle," 2004 Meeting Papers 19, Society for Economic Dynamics.
  2. Jacques, Armel, 2006. "Des firmes multinationales : un survol de la littérature microéconomique," L'Actualité Economique, Société Canadienne de Science Economique, vol. 82(4), pages 643-691, décembre.
  3. Thierry Warin & Phanindra V. Wunnava & Hubert P. Janicki, 2009. "Testing Mundell's Intuition of Endogenous OCA Theory," Review of International Economics, Wiley Blackwell, vol. 17(1), pages 74-86, 02.
  4. Kenneth S. Donahue & Thierry Warin, 2009. "Multilateralism cursed by bilateralism: Japan’s Role at the International Whaling Commission," Middlebury College Working Paper Series 0904, Middlebury College, Department of Economics.
  5. Malcolm Baker & C. Fritz Foley & Jeffrey Wurgler, 2004. "The Stock Market and Investment: Evidence from FDI Flows," NBER Working Papers 10559, National Bureau of Economic Research, Inc.

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