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Facts And Fallacies About Foreign Direct Investment

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Author Info
Robert C. Feenstra

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Abstract

This paper begins with a summary of the major trends in foreign direct investment over the 1980-1995 period. Following that we present five fallacies, dealing with: the magnitude of foreign investment in Japan; the impact of FDI on the U.S. and Japanese trade balance; the extent to with multinational corporations control U.S. trade; the impact of exchange rate movements on foreign investment flows; and finally, the impact of FDI on welfare of the host country. The paper concludes with a further analysis of the recent trends in foreign investment, and their implications for the competition faced by U.S. firms on international markets.

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Paper provided by California Davis - Department of Economics in its series Department of Economics with number 98-04.

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Handle: RePEc:fth:caldec:98-04

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Postal: University of California Davis - Department of Economics. One Shields Ave., California 95616-8578
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  1. Aitken, B. & Hanson, G.H. & Harrison, A.E., 1994. "Spillovers, Foreign Investment and Export Behavior," Papers 95-06, Columbia - Graduate School of Business.
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  2. Goodman, John B & Spar, Debora & Yoffie, David B, 1996. "Foreign Direct Investment and the Demand for Protection in the United States," International Organization, MIT Press, vol. 50(4), pages 565-91, Autumn.
  3. David E. Weinstein, 1996. "Foreign Direct Investment and Keiretsu: Rethinking U.S. and Japanese Policy," NBER Working Papers 5612, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Goodman, John B. & Spar, Debora & Yoffie, David B., 1996. "Foreign direct investment and the demand for protection in the United States," International Organization, Cambridge University Press, vol. 50(04), pages 565-591, September. [Downloadable!]
  5. Blonigen, Bruce A, 1997. "Firm-Specific Assets and the Link between Exchange Rates and Foreign Direct Investment," American Economic Review, American Economic Association, vol. 87(3), pages 447-65, June. [Downloadable!] (restricted)
  6. Aitken, B. & Harrison, A. & Lipsey, R.E., 1995. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela, and the United States," Papers 95-21, Columbia - Graduate School of Business.
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  7. Froot, Kenneth A & Stein, Jeremy C, 1991. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1191-217, November. [Downloadable!] (restricted)
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  8. Deborah L. Swenson, 1993. "Foreign Mergers and Acquisitions in the United States," NBER Chapters, in: Foreign Direct Investment, pages 255-284 National Bureau of Economic Research, Inc. [Downloadable!]
  9. Fukunari Kimura & Robert E. Baldwin, 1996. "Application of Nationality-Adjusted Net Sales and Value Added Framework: The Case of Japan," NBER Working Papers 5670, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Robert E. Lipsey, 1994. "Foreign-Owned Firms and U.S. Wages," NBER Working Papers 4927, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Bruce A. Blonigen & Robert C. Feenstra, 1997. "Protectionist Threats and Foreign Direct Investment," NBER Chapters, in: The Effects of U.S. Trade Protection and Promotion Policies, pages 55-80 National Bureau of Economic Research, Inc. [Downloadable!]
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  12. Brecher, Richard A. & Diaz Alejandro, Carlos F., 1977. "Tariffs, foreign capital and immiserizing growth," Journal of International Economics, Elsevier, vol. 7(4), pages 317-322, November. [Downloadable!] (restricted)
  13. Lipsey, Robert E. & Blomström, Magnus & Ramstetter, Eric, 1995. "Internationalized Production in World Output," Working Paper Series in Economics and Finance 80, Stockholm School of Economics.
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  14. Barrell, Ray & Pain, Nigel, 1999. "Trade restraints and Japanese direct investment flows," European Economic Review, Elsevier, vol. 43(1), pages 29-45, January. [Downloadable!] (restricted)
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  15. Bhagwati, Jagdish N & Dinopoulos, Elias & Wong, Kar-yiu, 1992. "Quid Pro Quo Foreign Investment," American Economic Review, American Economic Association, vol. 82(2), pages 186-90, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pol Antras, 2004. "Incomplete Contracts and the Product Cycle," Econometric Society 2004 North American Summer Meetings 62, Econometric Society. [Downloadable!]
    Other versions:
  2. Prema-chandra Athukorala & Sarath Rajapatirana, 2003. "Capital Inflows and the Real Exchange Rate: A Comparative Study of Asia and Latin America," Departmental Working Papers 2003-02, Australian National University, Economics RSPAS. [Downloadable!]
    Other versions:
  3. Malcolm Baker & C. Fritz Foley & Jeffrey Wurgler, 2004. "The Stock Market and Investment: Evidence from FDI Flows," NBER Working Papers 10559, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Warin, Thierry & Wunnava, Phanindra V. & Janicki, Hubert, 2008. "Testing Mundell’s Intuition of Endogenous OCA Theory," IZA Discussion Papers 3739, Institute for the Study of Labor (IZA). [Downloadable!]
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