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Patterns of Foreign Direct Investment in Poor Countries

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  • Nordas, H.K.

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 the sectoral allocation of investment and output observed in the South.

Suggested Citation

  • Nordas, H.K., 2000. "Patterns of Foreign Direct Investment in Poor Countries," Papers 2000:5, Universitat Zurich - Wirtschaftswissenschaftliches Institut.
    • Handle: RePEc:fth:zuriwi:2000:5
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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.
    2. World Bank, 1989. "World Development Report 1989," World Bank Publications - Books, The World Bank Group, number 5972.
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    More about this item

    Keywords

    INTERNATIONAL FINANCE ; ECONOMIC GROWTH ; CAPITAL MOVEMENTS;
    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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