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Foreign Direct Investment:
Analysis of Aggregate Flows
Assaf Razin & Efraim Sadka

Book Description | Endorsements
Chapter 1 [HTML] or [PDF format]

TABLE OF CONTENTS:

List of Figures ix
List of Tables x
Preface xi

Chapter 1: Overview 1
1.1 Channels of International Capital Flows 1
1.2 Micro-Level Studies 5
1.3 Macro-Finance Studies 6
1.4 Scope and Purpose 8
1.4.1 Bilateral FDI Flows 9
1.4.2 Roadmap 9

Part I. Foreign Direct Investors and Liquidity Shocks

Chapter 2: Foreign Direct Investment and Foreign Portfolio Investment:
Theory 15
2.1 Introduction 15
2.2 The Model 18
2.2.1 Management and Efficiency 19
2.2.2 Liquidity Shocks and Resale Prices 20
2.3 Ex-Ante Choice between FDI and FPI 22
2.3.1 Expected Value of FDI 22
2.3.2 Expected Value of FPI 23
2.3.3 FDI and FPI 24
2.4 Market Equilibrium 24
2.4.1 Allocation of Investors between FDI and FPI 24
2.4.2 Probability of Early Withdrawals 27
2.4.3 Welfare Analysis 28
2.5 Extension: Aggregate Liquidity Shocks 29
2.6 Conclusion 30
Appendix 2A: Derivation of Figure 2.1 31

Chapter 3: Foreign Direct Investment and Foreign Portfolio Investment:
Evidence 34
3.1 Introduction 34
3.2 Data 34
3.3 The Econometric Model 35
3.4 Results 38
3.5 Conclusion 39

Part II: Foreign Direct Investment with Threshold Barriers: Theory

Chapter 4: Foreign versus Domestic Direct Investment: Cream-Skimming 43
4.1 Introduction 43
4.2 FDI and Skimming High-Productivity Firms 44
4.3 FPI Inflows versus FDI Inflows 48
4.3.1 Gains to the Host Country 48
4.3.2 The Size of Investment in Capacity in the Host Country 50
4.4 Conclusion 51

Chapter 5: FDI Flows with Endogenous Domestic Wages: Heterogeneous Firms 53
5.1 Introduction 53
5.2 Wage Determination 53
5.3 M&A and Greenfield Investments 56
5.4 Conclusion 59
Appendix 5A.1: Some Comparable Statics Derivations 59
Appendix 5A.2: Reconciliation of the International Flow Paradox according to Lucas 61

Chapter 6: Country-Specific Aggregate Shocks: Representative Firm 63
6.1 Introduction 63
6.2 Country-Specific Productivity Shocks 64
6.3 Conflicting Effects of Source- and Host-Country Productivity Shocks 65
6.4 Conclusion 69

Part III. Foreign Direct Investment with Threshold Barriers: Empirics

Chapter 7: Overview of the Econometric Equations 73
7.1 Introduction 73
7.2 The Heckman Selection Model 73
7.3 The Tobit Model 76
7.4 Conclusion 77

Chapter 8: Application to a Baseline Sample: OLS, Tobit, and the Heckman Selection Models 79
8.1 Introduction 79
8.2 Data and Variables 79
8.3 Estimation 80
8.4 Evidence for Fixed Costs 85
8.5 Conclusion 88

Chapter 9: Productivity Shocks 89
9.1 Introduction 89
9.2 Data 90
9.3 Empirical Evidence 91
9.4 Conclusion 97

Chapter 10: Source and Host Corporate Tax Rates 99
10.1 Introduction 99
10.2 Source and Host Taxation 100
10.3 Empirical Evidence 102
10.4 Conclusion 106
Appendix 10A: Basic Principles of International Taxation of Capital Income 106

Part IV. Policy in a Globalized Economy

Chapter 11: Tax Competition and Coordination 111
11.1 Introduction 111
11.2 A Source-Host Country Model of Taxes and Public Goods 112
11.2.1 Production 112
11.2.2 Private Consumption 114
11.2.3 Government 116
11.3 Tax Competition 117
11.4 Tax Coordination 118
11.5 Conclusion 122

Epilogue 124
Notes 127
Bibliography 135
Index 141

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File created: 4/17/2014

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