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Foreign Direct Investment into Open and Closed Cities

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  • Dascher, Kristof

Abstract

This 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 Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 49197.

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Date of creation: 08 Aug 2013
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Handle: RePEc:pra:mprapa:49197

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Keywords: Foreign Direct Investment; Open City; Immigration; Urban Rent;

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  1. John M. Hartwick, 1993. "Capitalization of Productivity Growth in Urban Land Rent," Working Papers, Queen's University, Department of Economics 875, Queen's University, Department of Economics.
  2. Kugler, Maurice & Rapoport, Hillel, 2005. "Skilled emigration, business networks and foreign direct investment," Discussion Paper Series In Economics And Econometrics, Economics Division, School of Social Sciences, University of Southampton 0503, Economics Division, School of Social Sciences, University of Southampton.
  3. Beata S. Javorcik & Çaglar Özden & Mariana Spatareanu & Cristina Neagu, 2006. "Migrant Networks and Foreign Direct Investment," Working Papers Rutgers University, Newark, Department of Economics, Rutgers University, Newark 2006-003, Department of Economics, Rutgers University, Newark.
  4. Guimaraes, Paulo & Figueiredo, Octavio & Woodward, Douglas, 2000. "Agglomeration and the Location of Foreign Direct Investment in Portugal," Journal of Urban Economics, Elsevier, vol. 47(1), pages 115-135, January.
  5. Bruce A. Blonigen & Jeremy Piger, 2011. "Determinants of Foreign Direct Investment," NBER Working Papers 16704, National Bureau of Economic Research, Inc.
  6. J.P. Neary, 1995. "Factor Mobility and International Trade," CEP Discussion Papers, Centre for Economic Performance, LSE dp0248, Centre for Economic Performance, LSE.
  7. Barry, Frank, 2002. "Foreign Direct Investment, Infrastructure and the Welfare Effects of Labour Migration," Manchester School, University of Manchester, University of Manchester, vol. 70(3), pages 364-79, June.
  8. Bartel, Ann P, 1989. "Where Do the New U.S. Immigrants Live?," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 7(4), pages 371-91, October.
  9. Shigemi Yabuuchi, 1999. "Foreign direct investment, urban unemployment and welfare," The Journal of International Trade & Economic Development, Taylor & Francis Journals, Taylor & Francis Journals, vol. 8(4), pages 359-371.
  10. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 92(368), pages 825-48, December.
  11. Dierk Herzer, 2012. "How Does Foreign Direct Investment Really Affect Developing Countries' Growth?," Review of International Economics, Wiley Blackwell, Wiley Blackwell, vol. 20(2), pages 396-414, 05.
  12. Yoshitsugu Kanemoto, 1980. "A Note on the Measurement of Benefits of Public Inputs," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 13(1), pages 135-42, February.
  13. Fung, Michael Ka-yiu & Zeng, Jinli & Zhu, Lijing, 1999. "Foreign Capital, Urban Unemployment, and Economic Growth," Review of International Economics, Wiley Blackwell, Wiley Blackwell, vol. 7(4), pages 651-64, November.
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