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Patterns of foreign direct investment in poor countries

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  • Hildegunn Kyvik NordÅs

Abstract

This paper introduces endogenous adoption costs for productive assets in a Ramsey-type growth model with international capital flows. There are two classes of productive assets: owner-specific and location-specific. Adoption costs are an increasing function of the level of technology embodied in the investor's owner-specific assets and a declining function of the host country's location-specific assets. In this setting, the observed pattern of international capital flows is consistent with diminishing returns to capital. Further, our model predicts that the sectoral allocation of foreign direct investment is similar in rich and poor countries.

Suggested Citation

  • Hildegunn Kyvik NordÅs, 2001. "Patterns of foreign direct investment in poor countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 11(3), pages 247-265.
    • Handle: RePEc:taf:jitecd:v:11:y:2001:i:3:p:247-265
    DOI: 10.1080/09638190210151392
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    References listed on IDEAS

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    1. Oecd, 2001. "Understanding the Digital Divide," OECD Digital Economy Papers 49, OECD Publishing.
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    More about this item

    Keywords

    Foreign Direct Investment; Economic Growth; Industrial Structure; Adoption Costs;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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