Reconsideration of Some Paradoxes in the Theory of Optimal Foreign Investment

Michihiro Ohyama

The Economic Record, 1978, vol. 54, issue 3, 346-353

Abstract: The paper re‐examines some ‘paradoxical’ propositions on optimal foreign investment discussed by Negishi and Long in the context of growing international economies. It demonstrates the following rather critical conclusions:first, the unusual message of the Negishi‐Long paradoxes derives essentially from the requirement of growth equilibria rather than that of optimality; second, one of the paradoxes, attributable to Long, is at best a characterization of local optimum and, therefore, completely misleading as a policy recommendation:and thirdly, an appropriate change of standard of references would dissolve the Negishi‐Long paradoxes and reveal a neglected true paradox of the model.

Date: 1978
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https://doi.org/10.1111/j.1475-4932.1978.tb01636.x

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