Foreign Direct Investment into Open and Closed Cities
AbstractThis paper argues that the more open a city is to immigration, the more likely it is to welcome -- and hence also receive -- foreign direct investment. If immigration is allowed to complement the inflow of foreign capital, urban rent rises by more. This extra rise in rent aids in appeasing owners of capital specific to local traditional industries who else become worse off as foreign direct investment flows in. The paper's model may help give a simple alternative explanation of why urban centers such as Hong Kong, Singapore, Dublin or many cities on China's Eastern coast have received so much more FDI per capita. These cities could draw on a nearby pool of extra labor that -- by driving rents up and keeping wages down -- may have been decisive in the political struggle over whether to let foreign direct investors in.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 49197.
Date of creation: 08 Aug 2013
Date of revision:
Foreign Direct Investment; Open City; Immigration; Urban Rent;
Find related papers by JEL classification:
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-31 (All new papers)
- NEP-MIG-2013-08-31 (Economics of Human Migration)
- NEP-SEA-2013-08-31 (South East Asia)
- NEP-URE-2013-08-31 (Urban & Real Estate Economics)
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