 Outward foreign direct investment and sovereign risks in developing host countryFeiqiong Chen, Fangfang Zhong and Yao Chen Economic Modelling, 2014, vol. 41, issue C, 166-172 Abstract: Outward foreign direct investment can affect developing, technology-receiving host countries mainly through tax revenue, technology spillover and the competition effect. With the consideration of these three effects of the outward foreign direct investment on host country, we develop a dynamic game model of interaction between foreign investors and host country from a dynamic perspective, to reveal the dynamic evolution mechanism of the sovereign risk faced by outward foreign direct investment. The result shows that: host governments usually give a specific tax holiday for outward foreign direct investors, and during the period of tax holiday investment decision of investors would be influenced by technology spillover effect, specifically, the greater the technology spillover the slower the growth of investment stock. Once the system reaches a stable state, the host country will impose a tax on multinational corporations. If the equilibrium tax rate of industries or regions which makes it easy to obtain technology spillover is high, then the equilibrium capital stock would be low. Keywords: Outward foreign direct investment (OFDI); Sovereign risks; Technology spillover; Dynamic game model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:41:y:2014:i:c:p:166-172 DOI: 10.1016/j.econmod.2014.05.011 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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