Controlled Openness and Foreign Direct Investment
AbstractThe purpose of this paper is to offer an explanation of why a developing country may adopt a partial reform under which foreign direct investments are controlled. We consider a country where the ruling elite [referred to as State capital] prevents the entry of Foreign capital and taxes the private sector before reform. The impetus to reform comes from an improved productivity of Foreign capital. The reform diminishes State capital's ability to tax the private sector but allows it to extract payment from Foreign capital for access to its markets. We show that a higher productivity of Foreign capital always increases the attractiveness of a partial reform under which State capital can control the inflow of Foreign capital. In contrast, a higher productivity of Foreign capital can reduce the attractiveness of a full reform under which the entry of Foreign capital is unregulated. Our analysis implies that, under the circumstances where the impetus to reform comes from improvements in Foreign productivity, State capital's exercise of control over Foreign capital's inflow may be a necessary condition for the reform to take place at all. In the absence of such a control, State capital may be reluctant to carry out the efficiency-enhancing reforms."
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6123.
Date of creation: Aug 1997
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- F15 - International Economics - - Trade - - - Economic Integration
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alesina, A. & Drazen, A., 1991.
"Why Are Stabilizations Delayed?,"
6-91, Tel Aviv - the Sackler Institute of Economic Studies.
- Jefferson, Gary H & Rawski, Thomas G & Yuxin, Zheng, 1992. "Growth, Efficiency, and Convergence in China's State and Collective Industry," Economic Development and Cultural Change, University of Chicago Press, vol. 40(2), pages 239-66, January.
- Paul M. Romer, 1994.
"New Goods, Old Theory, and the Welfare Costs of Trade Restrictions,"
NBER Working Papers
4452, National Bureau of Economic Research, Inc.
- Romer, Paul, 1994. "New goods, old theory, and the welfare costs of trade restrictions," Journal of Development Economics, Elsevier, vol. 43(1), pages 5-38, February.
- Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
- Feldman, David H & Gang, Ira N, 1996. "Revenue Motives and Trade Liberalization," Review of International Economics, Wiley Blackwell, vol. 4(3), pages 276-81, October.
- Shang-Jin Wei, 1997. "Gradualism versus Big Bang: Speed and Sustainability of Reforms," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1234-47, November.
- Dani Rodrik, 1992. "The Rush to Free Trade in the Developing World: Why So Late? Why Now? Will it Last?," NBER Working Papers 3947, National Bureau of Economic Research, Inc.
- Gelb, Alan & Jefferson, Gary & Singh, Inderjit, 1993. "Can Communist economies transform incrementally? China's experience," Policy Research Working Paper Series 1189, The World Bank.
- Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-87, December.
- Klaus Desmet & Felipe Meza & Juan A. Rojas, 2008.
"Foreign direct investment and spillovers: gradualism may be better,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 41(3), pages 926-953, August.
- Desmet, Klaus & Meza, Felipe & Rojas, Juan A., 2008. "Foreign direct investment and spillovers : gradualism may be better," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/4801, Universidad Carlos III de Madrid.
- Desmet, Klaus & Rojas, Juan A, 2004. "Foreign Direct Investment and Spillovers: Gradualism May Be Better," CEPR Discussion Papers 4660, C.E.P.R. Discussion Papers.
- Klaus Desmet & Juan Rojas, 2004. "Foreign Direct Investment And Spillovers: Gradualism May Be Better," Economics Working Papers we040401, Universidad Carlos III, Departamento de Economía.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.