Controlled Openness and Foreign Direct Investment

Joshua Aizenman and Sang-Seung Yi

Review of Development Economics, 1998, vol. 2, issue 1, 1-10

Abstract: The paper investigates why a developing country may adopt a partial reform. A country is considered where the ruling elite (referred to as state capital) prevents the entry of foreign capital, and taxes the private sector before reform. A higher productivity of foreign capital always increases the attractiveness of a partial reform under which state capital can control the inflow of foreign capital, but can reduce the attractiveness of a full reform under which the entry of foreign capital is unregulated. Hence, state capital’s control over foreign capital may be a necessary condition for the reform to take place at all.

Date: 1998
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https://doi.org/10.1111/1467-9361.00024

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Working Paper: Controlled Openness and Foreign Direct Investment (1997)
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