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Chanelling Domestic Saving into Productive Investment Under Asymmetric Information: The Essential Role of Foreign Direct Investment

Author

Listed:
  • Razin, A.
  • Sadka, E.
  • Yuen, C.W.

Abstract

Foreign direct investment (FDI) is observed to be a predominant form of capital flows to low and middle income countries with insufficiently developed capital markets. This paper analyzes the problem of channelling domestic savings into productive investment in the presence of asymmetric information between the managing owners of firms and other portfolio stakeholders.

Suggested Citation

  • Razin, A. & Sadka, E. & Yuen, C.W., 1997. "Chanelling Domestic Saving into Productive Investment Under Asymmetric Information: The Essential Role of Foreign Direct Investment," Papers 36-97, Tel Aviv.
  • Handle: RePEc:fth:teavfo:36-97
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    References listed on IDEAS

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    1. Razin, Assaf & Sadka, Efraim & Yuen, Chi-Wa, 1998. "A pecking order of capital inflows and international tax principles," Journal of International Economics, Elsevier, vol. 44(1), pages 45-68, February.
    2. Gordon, Roger H & Bovenberg, A Lans, 1996. "Why Is Capital So Immobile Internationally? Possible Explanations and Implications for Capital Income Taxation," American Economic Review, American Economic Association, vol. 86(5), pages 1057-1075, December.
    3. Gordon, Roger H. & Varian, Hal R., 1989. "Taxation of asset income in the presence of a world securities market," Journal of International Economics, Elsevier, pages 205-226.
    4. Jacob Frenkel & Assaf Razin & Efraim Sadka, 1991. "International Taxation in an Integrated World," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061430, January.
    5. Huizinga, Harry & Nielsen, Soren Bo, 1997. "Capital income and profit taxation with foreign ownership of firms," Journal of International Economics, Elsevier, pages 149-165.
    6. Jonathan Eaton & Mark Gersovitz, 1987. "Country Risk and the Organization of International Capital Transfer," NBER Working Papers 2204, National Bureau of Economic Research, Inc.
    7. Razin, A. & Sadka, E. & Yuen, C.W., 1997. "Chanelling Domestic Saving into Productive Investment Under Asymmetric Information: The Essential Role of Foreign Direct Investment," Papers 36-97, Tel Aviv.
    8. Paul A. Samuelson, 1956. "Social Indifference Curves," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 1-22.
    9. Assaf Razin & Efraim Sadka & Chi-Wa Yuen, 1997. "Channeling Domestic Savings into Productive Investment Under Asymmetric Information: The Essential Role of Foreign Direct Investment," NBER Working Papers 6338, National Bureau of Economic Research, Inc.
    10. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
    11. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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    Citations

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    Cited by:

    1. Assaf Razin & Chi-Wa Yuen & Efraim Sadka, 1998. "Capital Flows with Debt- and Equity-Financed Investment-Equilibrium Structure and Efficiency Implications," IMF Working Papers 98/159, International Monetary Fund.
    2. Diemo Dietrich, 2004. "Financing FDI into Developing Economies and the International Transmission of Business Cycle Fluctuations," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(IV), pages 449-481, December.
    3. Assaf Razin & Efraim Sadka & Chi-Wa Yuen, "undated". "Quantitative Implications of the Home Bias: Foreign Underinvestment, Domestic Oversaving, and Corrective Taxation," EPRU Working Paper Series 97-27, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    4. Assaf Razin & Efraim Sadka & Chi-Wa Yuen, 2001. "Why International Equity Inflows to Emerging Markets are Inefficient and Small Relative to International Debt Flows," NBER Working Papers 8659, National Bureau of Economic Research, Inc.
    5. Dietrich, Diemo, 2002. "Investment Behaviour of Financially Constrained Multinational Corporations: Consequences for the International Transmission of Business Cycle Fluctuations," IWH Discussion Papers 165, Halle Institute for Economic Research (IWH).
    6. repec:zbw:iwhdps:165 is not listed on IDEAS

    More about this item

    Keywords

    FOREIGN INVESTMENTS ; SAVINGS ; CAPITAL MARKET;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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