Gains from FDI inflows with incomplete information

Assaf Razin*, Efraim Sadka

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

19 Scopus citations


The paper develops an international macroeconomic model of FDI flows with a unique feature: a hands-on management ability to react in real time to changing economic environments. Anticipating this advantage, foreign direct investors can outbid other investors in a certain industry in which they specialize in the source country. The model can explain both two-way FDI flows among developed countries and one-way FDI flows from developed to developing countries. The unique gains from FDI to the host country stem from the increased efficiency of domestic investment.

Original languageEnglish
Pages (from-to)71-77
Number of pages7
JournalEconomics Letters
Issue number1
StatePublished - 1 Jan 2003


FundersFunder number
European Commission


    • Asymmetric information
    • Control
    • FDI vs Portfolio
    • Free-rider problem
    • Gains-from-capital inflows


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