Gains from FDI inflows with incomplete information.

DOI10.1016/S0165-1765(02)00179-9MaRDI QIDQ1853712zbMATH OpenOpenAlexFDO

Authors Assaf Razin, Efraim Sadka

Publication date 22 January 2003

Published in Economics Letters (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/s0165-1765(02)00179-9

zbMATH Keywords

Asymmetric informationControlFDI vs PortfolioFree-rider problemGains-from-capital inflows

Mathematics Subject Classification ID

Macroeconomic theory (monetary models, models of taxation) (91B64)

Review text

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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