IDEAS home Printed from https://ideas.repec.org/a/ris/integr/0460.html
   My bibliography  Save this article

Substitution between Foreign Capital in China, India, the Rest of the World, and Latin America: Much Ado about Nothing?

Author

Listed:
  • Cravino, Javier

    () (University of California, Los Angeles)

  • Lederman, Daniel

    () (The World Bank)

Abstract

This paper explores the impact of the emergence of China and India on Foreign Capital Stocks (FCS) in other economies. Using bilateral FCS data from 1990- 2003 and drawing from the Knowledge-Capital Model of multinational enterprises to control for fundamental determinants of FCS across countries, the evidence suggests that the impact of foreign capital in China and India on other countries’ FCS has been positive. This finding is robust across different specifications and estimation techniques. There is surprisingly weak evidence of substitution in manufacturing FCS away from Central America/Mexico in favor of China, and from Southern Cone countries to India, but these findings are not robust to the use of alternative estimation techniques. In sum, fears of a global competition for FDI seem misplaced, and policymakers concerned about attracting foreign investors should focus their efforts on the fundamentals determinants of FDI.

Suggested Citation

  • Cravino, Javier & Lederman, Daniel, 2008. "Substitution between Foreign Capital in China, India, the Rest of the World, and Latin America: Much Ado about Nothing?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 953-976.
  • Handle: RePEc:ris:integr:0460
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrea Bassanini & Stefano Scarpetta, 2001. "Does Human Capital Matter for Growth in OECD Countries?: Evidence from Pooled Mean-Group Estimates," OECD Economics Department Working Papers 282, OECD Publishing.
    2. Sala-i-Martin, Xavier X., 1996. "Regional cohesion: Evidence and theories of regional growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1325-1352, June.
    3. Dehejia, Vivek H., 1998. "Can standards immiserize?," Economics Letters, Elsevier, vol. 59(3), pages 361-366, June.
    4. Cees van Beers, 1998. "Labour Standards and Trade Flows of OECD Countries," The World Economy, Wiley Blackwell, vol. 21(1), pages 57-73, January.
    5. Gabriel Rodriguez & Yiagadeesen Samy, 2003. "Analysing the effects of labour standards on US export performance. A time series approach with structural change," Applied Economics, Taylor & Francis Journals, vol. 35(9), pages 1043-1051.
    6. Richard A. Brecher, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 88(1), pages 98-116.
    7. Alan B. Krueger, 1999. "From Bismarck to Maastricht: The March to European Union and the Labor Compact," Working Papers 803, Princeton University, Department of Economics, Industrial Relations Section..
    8. Brecher, Richard A., 1974. "Optimal commercial policy for a minimum-wage economy," Journal of International Economics, Elsevier, vol. 4(2), pages 139-149, May.
    9. Vivek Dehejia & Yiagadeesen Samy, 2004. "Trade and labour standards: theory and new empirical evidence," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 13(2), pages 179-198.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shepherd, Ben & Wilson, John S., 2006. "Road infrastructure in Europe and Central Asia : does network quality affect trade ?," Policy Research Working Paper Series 4104, The World Bank.
    2. Jenkins, Rhys & Peters, Enrique Dussel & Moreira, Mauricio Mesquita, 2008. "The Impact of China on Latin America and the Caribbean," World Development, Elsevier, vol. 36(2), pages 235-253, February.
    3. Christian Dreger & Julian Donaubauer, 2016. "The End of Cheap Labour: Are Foreign Investors Leaving China?," Working Papers id:11277, eSocialSciences.
    4. Fung , K.C. & Korhonen, Iikka & Li, Ke & Ng, Francis, 2008. "China and central and eastern European countries : regional networks, global supply chain, or international competitors?," Policy Research Working Paper Series 4689, The World Bank.
    5. Miria Pigato, 2009. "Strengthening China's and India's Trade and Investment Ties to the Middle East and North Africa," World Bank Publications, The World Bank, number 2626.
    6. Daniel Lederman & Marcelo Olarreaga & Guillermo Perry, 2007. "Latin America´s response to China and India: overview of research findings and policy implications - Observatorio de Política," Revista de Economía y Estadística, Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas, vol. 0(1), pages 149-193, January.
    7. Resmini, Laura & Siedschlag, Iulia, 2013. "Is foreign direct investment to China crowding out the foreign direct investment to other countries?," China Economic Review, Elsevier, vol. 25(C), pages 1-16.

    More about this item

    Keywords

    foreign direct investment; China; India; Latin America;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:integr:0460. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jong-Eun Lee). General contact details of provider: http://edirc.repec.org/data/desejkr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.