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Economic Growth with Imperfect Foreign Investment

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  • Henry Thompson

    (Department of Economics, Auburn University.)

Abstract

Foreign investment has proven essential for economic growth and the present paper connects it explicitly to the capital stock in the neoclassical growth model. The assumption in the literature of perfect foreign investment implies no distinction between domestic and foreign capital. In the applied growth literature, the working assumption is that foreign investment shifts technology. The present paper introduces imperfect foreign investment as a function of the difference between domestic and foreign capital returns. The foreign capital stock is then separate and the small open economy may be a steady state foreign investment host (or source). Convergence is incomplete in the two country model.

Suggested Citation

  • Henry Thompson, 2004. "Economic Growth with Imperfect Foreign Investment," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0409, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    • Handle: RePEc:ays:ispwps:paper0409
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    File URL: http://icepp.gsu.edu/files/2015/03/ispwp0409.pdf
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    References listed on IDEAS

    as
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    Keywords

    Economic Growth; Foreign Investment; Foreign capital;
    All these keywords.

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