FDI Spillovers, Financial Markets, and Economic Development

This paper examines the role financial markets play in the relationship between foreign direct investment (FDI) and economic development. We model an economy with a continuum of agents indexed by their level of ability. Agents can either work for the foreign company or undertake entrepreneurial acti...

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Bibliographic Details
Main Author: Sayek, Selin
Other Authors: Alfaro, Laura, Chanda, Areendam, Kalemli-Ozcan, Sebnem
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2003
Series:IMF Working Papers
Subjects:
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Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:This paper examines the role financial markets play in the relationship between foreign direct investment (FDI) and economic development. We model an economy with a continuum of agents indexed by their level of ability. Agents can either work for the foreign company or undertake entrepreneurial activities, which are subject to a fixed cost. Better financial markets allow agents to take advantage of knowledge spillovers from FDI, magnifying the output effects of FDI. Empirically, we show that well-developed financial markets allow significant gains from FDI, while FDI alone plays an ambiguous role in contributing to development
Physical Description:32 pages
ISBN:9781451859485