Economic Growth with Imperfect Foreign Investment

Henry Thompson

International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University

Abstract: Foreign investment has proven essential for economic growth and the present paper connects it explicitly to the capital stock in the neoclassical growth model. The assumption in the literature of perfect foreign investment implies no distinction between domestic and foreign capital. In the applied growth literature, the working assumption is that foreign investment shifts technology. The present paper introduces imperfect foreign investment as a function of the difference between domestic and foreign capital returns. The foreign capital stock is then separate and the small open economy may be a steady state foreign investment host (or source). Convergence is incomplete in the two country model.

Keywords: Economic Growth; Foreign Investment; Foreign capital (search for similar items in EconPapers)
Pages: 17 pages
Date: 2004-09-01
New Economics Papers: this item is included in nep-dev
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Persistent link: https://EconPapers.repec.org/RePEc:ays:ispwps:paper0409

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