Working Paper: NBER ID: w9008
Authors: Assaf Razin; Efraim Sadka
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 country. The unique gains from FDI to the host country stem from the increased eciency of domestic investment.
Keywords: FDI; Portfolio; Free-rider problem; Control gains from capital inflows; Asymmetric information
JEL Codes: F2; F3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| FDI (F23) | Domestic Investment Efficiency (G31) |
| FDI (F23) | Higher Productivity (O49) |
| Higher Productivity (O49) | Domestic Investment Efficiency (G31) |