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North–South FDI and directed technical change

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  • Li, Shang-ao
  • Pan, Shan
  • Chi, Shawn

Abstract

This paper presents a model to explore how patterns of North–South FDI affect the bias of technology and the host country's economic growth. We develop our growth model in a unified framework of directed technical change and cooperative game. The host country's economic growth is embedded in a duopolistic international joint venture. Our model illustrates that: (i) the relative skill-augmenting technology is decreasing in the North–South relative bargaining power if technical and nontechnical intermediates are substitutes, but increasing if they are complements; (ii) there exists an inverse U-shaped relationship between the North–South relative profit share and the host country's steady-state economic growth rate.

Suggested Citation

  • Li, Shang-ao & Pan, Shan & Chi, Shawn, 2016. "North–South FDI and directed technical change," Economic Modelling, Elsevier, vol. 59(C), pages 425-435.
    • Handle: RePEc:eee:ecmode:v:59:y:2016:i:c:p:425-435
    DOI: 10.1016/j.econmod.2016.08.008
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    More about this item

    Keywords

    FDI; Directed technical change; Bargaining power; Economic growth;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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