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Research Collection School Of Economics

Foreign Direct Investment

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Full-Text Articles in International Economics

Institutional Complementarity Across Countries In Bilateral Fdi Flows: Theory And Evidence, Pao-Li Chang Dec 2015

Institutional Complementarity Across Countries In Bilateral Fdi Flows: Theory And Evidence, Pao-Li Chang

Research Collection School Of Economics

This paper builds a theory to characterize the comparative advantage of MNEs based in countries of different institutional qualities. It is shown that MNEs headquartered in countries of poorer state institutions will invest more in `informal institutions; and choose to undertake FDI in countries of weaker institutions. At the aggregate, MNEs on average generate more net profits in countries of weaker institutions, the poorer the institutional environment at home. I conduct an extensive test of the theory using bilateral FDI volume for 219 economies in year 2001-2010. The results indicate a statistically significant and robust institutional complementarity effect in bilateral ...


Export-Learning And Fdi With Heterogeneous Firms, Amanda Jakobsson Jun 2015

Export-Learning And Fdi With Heterogeneous Firms, Amanda Jakobsson

Research Collection School Of Economics

I present a dynamic general equilibrium model with heterogeneous firms that can innovate, learn how to export and then go on to become multinational firms. Entering the foreign market is a dynamic process where firms first learn how to export and then can learn how to adapt production to a low-wage location (multinational production). I solve the model numerically and, starting from a 1990 benchmark of US and Mexico, study how policy changes such as stronger patent protection and trade liberalization affect innovation, technology transfer and consumer welfare. In particular, I disentangle how labor resources are reallocated within regions in ...


Complementarity In Institutional Quality In Bilateral Fdi Flows, Pao Li Chang Oct 2014

Complementarity In Institutional Quality In Bilateral Fdi Flows, Pao Li Chang

Research Collection School Of Economics

This paper develops a theory on the complementarity in institutional qualities between the home and host countries in bilateral FDI. Firms ‘born’ in countries with poorer institutions tend to invest more in informal institutions to mitigate political risk. The marginal advantage of higher informal institution endowment is bigger when the political risk at the FDI destination is higher. Thus, all else being equal, the ranking of the MNE’s home institutions predicts the ranking of the institutional qualities of their FDI destinations. I find robust empirical evidence for this theoretical prediction using bilateral FDI for 219 economies during year 2001-2010.


In Support Of The Trips Agreement, Amanda Jakobsson, Paul S. Segerstrom Feb 2012

In Support Of The Trips Agreement, Amanda Jakobsson, Paul S. Segerstrom

Research Collection School Of Economics

This paper challenges the conventional wisdom that the TRIPs agreement is bad for developing countries. We present a dynamic general equilibrium model of North-South trade that allows us to study the implications of stronger intellectual property rights (IPR) protection and simultaneous trade liberalization. In our model, stronger IPR protection in the South (TRIPs) leads to more innovation in the North, more technology transfer to the South and higher long-run southern consumer welfare. The South also benefits from trade liberalization but the welfare gains from TRIPs are considerably larger.


Risk, Learning, And The Technology Content Of Fdi: A Dynamic Model, Pao Li Chang, Chia-Hui Lu Feb 2010

Risk, Learning, And The Technology Content Of Fdi: A Dynamic Model, Pao Li Chang, Chia-Hui Lu

Research Collection School Of Economics

This paper builds a dynamic model of catching up to examine the policy stance of developing countries in attracting inward FDI. We show that the observably evident risk of FDI failure sets a minimum threshold on the South's technology capacity and furthermore creates a limit on the technology content of inward FDI. We provide economic foundations for the determinants of the FDI risk and formalize how the risk factor evolves over time as the South moves up its technology ladder. The model offers an insightful and tractable framework for empirical studies with a dynamic content, and reconciles many relevant ...