The Impact of Investment Policy in a Changing Global Economy: a Review of the Literature

40 Pages Posted: 20 Apr 2016

See all articles by Roberto Echandi

Roberto Echandi

University of Bern - World Trade Institute

Jana Krajcovicova

University of Bern - World Trade Institute

Christine Zhen-Wei Qiang

World Bank - Information and Communications Technologies Department (ICT)

Date Written: October 13, 2015

Abstract

Evidence shows that foreign direct investment can provide many benefits to host countries, including productivity improvements, better jobs, and knowledge transfer. Further, it can serve as a vehicle for transformation of domestic production and better integration with global value chains. Nonetheless, these benefits are not automatic. Investment policies are required to maximize the potential gains of foreign direct investment. One challenge is that there are different kinds of foreign direct investment, and each may have different economic, social, and environmental impacts. However, the literature analyzing foreign direct investment often tends to swing from an extremely case-specific focus ? analyzing experiences in one particular country in a single sector during a given period ? to lumping together the analysis as if it was a homogenous phenomenon. Investment policy formulation requires a framework sophisticated enough to differentiate between the various kinds of foreign direct investment, as well as potential challenges and benefits for development. It must also be simple enough to enable governments to organize and prioritize the multiple and complex variables affecting the maximization of investment benefits. This paper presents an overview of the literature on the impact of foreign direct investment. The paper argues that a logical framework is needed to organize existing evidence from research to fill gaps in the literature and make existing evidence more useful in targeting policy making.

Keywords: Marketing, Consumption, Fiscal & Monetary Policy, Private Sector Economics, Private Sector Development Law, Employment and Shared Growth, International Trade and Trade Rules

Suggested Citation

Echandi, Roberto and Krajcovicova, Jana and Qiang, Christine Zhen-Wei, The Impact of Investment Policy in a Changing Global Economy: a Review of the Literature (October 13, 2015). World Bank Policy Research Working Paper No. 7437, Available at SSRN: https://ssrn.com/abstract=2673878

Roberto Echandi (Contact Author)

University of Bern - World Trade Institute ( email )

Hallerstrasse 6/8
Berne, CH-3012
Switzerland

Jana Krajcovicova

University of Bern - World Trade Institute ( email )

Hallerstrasse 6/8
Berne, CH-3012
Switzerland

Christine Zhen-Wei Qiang

World Bank - Information and Communications Technologies Department (ICT) ( email )

Strategy Unit
2121 Pennsylvania Avenue NW
Washington, DC 20433
202-473-8259 (Phone)
202-473-1155 (Fax)

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