Controlled Openness and Foreign Direct Investment
The paper investigates why a developing country may adopt a partial reform. A country is considered where the ruling elite (referred to as state capital) prevents the entry of foreign capital, and taxes the private sector before reform. 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, but can reduce the attractiveness of a full reform under which the entry of foreign capital is unregulated. Hence, state capital's control over foreign capital may be a necessary condition for the reform to take place at all. Copyright 1998 by Blackwell Publishing Ltd
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Volume (Year): 2 (1998)
Issue (Month): 1 (February)
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References listed on IDEAS
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