Gains from FDI inflows with incomplete information

Assaf Razin; Efraim Sadka

doi:10.1016/S0165-1765(02)00179-9

Gains from FDI inflows with incomplete information

Assaf Razin^*, Efraim Sadka

^*Corresponding author for this work

School of Economics

Research output: Contribution to journal › Article › peer-review

Abstract

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 language	English
Pages (from-to)	71-77
Number of pages	7
Journal	Economics Letters
Volume	78
Issue number	1
DOIs	https://doi.org/10.1016/S0165-1765(02)00179-9
State	Published - 1 Jan 2003

Keywords

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

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10.1016/S0165-1765(02)00179-9

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abstract = "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.",

keywords = "Asymmetric information, Control, FDI vs Portfolio, Free-rider problem, Gains-from-capital inflows",

author = "Assaf Razin and Efraim Sadka",

note = "Funding Information: The authors are grateful to Philip Lane and Morten Raven for helpful comments and suggestions on an earlier draft and to the European Commission for financial support for the RTN project, {\textquoteleft}Analysis of International Capital Markets: Understanding Europe{\textquoteright}s Role in the Global Economy{\textquoteright}.",

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AB - 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.

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KW - Control

KW - FDI vs Portfolio

KW - Free-rider problem

KW - Gains-from-capital inflows

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Gains from FDI inflows with incomplete information

Abstract

Keywords

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