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FDI spillovers, New Industry Development, and Economic Growth

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  • Thanh Tam Nguyen-Huu

    (Métis Lab EM Normandie - EM Normandie - École de Management de Normandie)

  • Ngoc‐sang Pham

Abstract

The paper investigates the optimal strategy of a small open economy receiving FDI in an optimal growth context. We prove that no domestic firm can enter the new industry when the multinational enterprise's productivity or the fixed entry cost is high. Nevertheless, the host country's investment stock converges to a higher steady state than an economy without FDI. A domestic firm enters the new industry if its productivity is high enough. Moreover, the domestic firm can dominate or even eliminate its foreign counterpart.

Suggested Citation

  • Thanh Tam Nguyen-Huu & Ngoc‐sang Pham, 2023. "FDI spillovers, New Industry Development, and Economic Growth," Post-Print hal-04240260, HAL.
    • Handle: RePEc:hal:journl:hal-04240260
    DOI: 10.1111/jpet.12670
    Note: View the original document on HAL open archive server: https://hal.science/hal-04240260
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    References listed on IDEAS

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    Cited by:

    1. Ngoc-Sang Pham, 2023. "Some Lectures on Macroeconomics," Working Papers hal-04366349, HAL.

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    Keywords

    Optimal growth; FDI spillovers; TFP; Fixed cost;
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