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Foreign Direct Investment into Open and Closed Cities

  • Dascher, Kristof

This paper argues that the more open a city is to immigration, the more likely it is to welcome -- and hence also receive -- foreign direct investment. If immigration is allowed to complement the inflow of foreign capital, urban rent rises by more. This extra rise in rent aids in appeasing owners of capital specific to local traditional industries who else become worse off as foreign direct investment flows in. The paper's model may help give a simple alternative explanation of why urban centers such as Hong Kong, Singapore, Dublin or many cities on China's Eastern coast have received so much more FDI per capita. These cities could draw on a nearby pool of extra labor that -- by driving rents up and keeping wages down -- may have been decisive in the political struggle over whether to let foreign direct investors in.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 49197.

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Date of creation: 08 Aug 2013
Date of revision:
Handle: RePEc:pra:mprapa:49197
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  1. Yoshitsugu Kanemoto, 1980. "A Note on the Measurement of Benefits of Public Inputs," Canadian Journal of Economics, Canadian Economics Association, vol. 13(1), pages 135-42, February.
  2. Maurice Kugler & Hillel Rapoport, 2005. "Skilled Emigration, Business Networks and Foreign Direct Investment," CESifo Working Paper Series 1455, CESifo Group Munich.
  3. Guimaraes, Paulo & Figueiredo, Octavio & Woodward, Douglas, 2000. "Agglomeration and the Location of Foreign Direct Investment in Portugal," Journal of Urban Economics, Elsevier, vol. 47(1), pages 115-135, January.
  4. Dierk Herzer, 2010. "How does foreign direct investment really affect developing countries` growth?," Ibero America Institute for Econ. Research (IAI) Discussion Papers 207, Ibero-America Institute for Economic Research.
  5. J.P. Neary, 1995. "Factor Mobility and International Trade," CEP Discussion Papers dp0248, Centre for Economic Performance, LSE.
  6. Bruce A. Blonigen & Jeremy Piger, 2014. "Determinants of foreign direct investment," Canadian Journal of Economics, Canadian Economics Association, vol. 47(3), pages 775-812, August.
  7. Barry, Frank, 2002. "Foreign Direct Investment, Infrastructure and the Welfare Effects of Labour Migration," Manchester School, University of Manchester, vol. 70(3), pages 364-79, June.
  8. Javorcik, Beata S. & Özden, Çaglar & Spatareanu, Mariana & Neagu, Cristina, 2011. "Migrant networks and foreign direct investment," Journal of Development Economics, Elsevier, vol. 94(2), pages 231-241, March.
  9. Shigemi Yabuuchi, 1999. "Foreign direct investment, urban unemployment and welfare," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(4), pages 359-371.
  10. Fujita,Masahisa, 1991. "Urban Economic Theory," Cambridge Books, Cambridge University Press, number 9780521396455.
  11. Fung, Michael Ka-yiu & Zeng, Jinli & Zhu, Lijing, 1999. "Foreign Capital, Urban Unemployment, and Economic Growth," Review of International Economics, Wiley Blackwell, vol. 7(4), pages 651-64, November.
  12. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-48, December.
  13. Bartel, Ann P, 1989. "Where Do the New U.S. Immigrants Live?," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 371-91, October.
  14. John M. Hartwick, 1993. "Capitalization of Productivity Growth in Urban Land Rent," Working Papers 875, Queen's University, Department of Economics.
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