Escaping the middle income trap and getting economic growth: How does FDI can help the host country?
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16 février 2021
- ISIDORE Id: 10670/1.3d4333...
- halshs: halshs-03143087
info:eu-repo/semantics/OpenAccess
Mots-clés
Optimal growth FDI MNE R&D fixed cost E - Macroeconomics and Monetary Economics/E.E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy F - International Economics/F.F2 - International Factor Movements and International Business/F.F2.F23 - Multinational Firms • International Business F - International Economics/F.F4 - Macroeconomic Aspects of International Trade and Finance O - Economic Development, Innovation, Technological Change, and Growth O - Economic Development, Innovation, Technological Change, and Growth/O.O3 - Innovation • Research and Development • Technological Change • Intellectual Property Rights O - Economic Development, Innovation, Technological Change, and Growth/O.O4 - Economic Growth and Aggregate Productivity -fin]Sujets proches
Economic growth Growth, Economic Development, EconomicCiter ce document
Thanh Tam Nguyen-Huu et al., « Escaping the middle income trap and getting economic growth: How does FDI can help the host country? », HAL SHS (Sciences de l’Homme et de la Société), ID : 10670/1.3d4333...
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Résumé
The paper investigates the country receiving FDI's optimal strategy in an optimal growth context. First, if the multinational enterprise has high productivity or the entry cost is high, no domestic firm enters the new industry. Still, the host economy's investment stock converges to a higher steady state than that of the closed economy. Second, if the old sector is strong enough and the domestic firm's productivity is high, the foreign firm will be dominated, even eliminated by the domestic one. Third, we show that if the host country invests in R&D, its economy may grow without bounds. In this case, FDI helps the host country only at the first stages of its development process. We present empirical evidence that supports our theoretical findings.
