Abstract

http://ssrn.com/abstract=336371
 
 

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The Role of Information in Driving FDI: Theory and Evidence


Assaf Razin


Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Ashoka Mody


International Monetary Fund (IMF) - Research Department

Efraim Sadka


Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Institute for the Study of Labor (IZA)

October 2002

NBER Working Paper No. w9255

Abstract:     
We develop a simple information-based model of FDI flows in which the abundance of intangible' capital in the source countries, which generates expertise in cream-skimming investment projects in the host countries and enhances FDI flows. Corporate transparency in the host countries, on the other hand, diminishes the value of this expertise and thereby reduces the flow of FDI. Empirical evidence (from a sample of 12 source countries and 45 host countries over the 1980s and 1990s) which is analyzed in a gravity equation model provides some support to our theoretical hypotheses. The gains from FDI in the host country in our model are reflected in a more e.cient size of stock of domestic capital and its allocation across firms. These gains depend crucially (and inversely) on the degree of competition among FDI investors.

Number of Pages in PDF File: 22

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Date posted: October 4, 2002  

Suggested Citation

Razin, Assaf and Mody, Ashoka and Sadka, Efraim, The Role of Information in Driving FDI: Theory and Evidence (October 2002). NBER Working Paper No. w9255. Available at SSRN: http://ssrn.com/abstract=336371

Contact Information

Assaf Razin (Contact Author)
Tel Aviv University - Eitan Berglas School of Economics ( email )
P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3 640 7303 (Phone)
+972 3 640 9908 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
HOME PAGE: http://www.CESifo.de
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Ashoka Mody
International Monetary Fund (IMF) - Research Department ( email )
700 19th Street NW
Washington, DC 20431
United States
202-623-9617 (Phone)
202-589-9617 (Fax)
HOME PAGE: http://www.amody.com
Efraim Sadka
Tel Aviv University - Eitan Berglas School of Economics ( email )
P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3 640 9712 (Phone)
+972 3 642 8074 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
HOME PAGE: http://www.CESifo.de
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
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References:  16
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