A Comparison Model of Investment in Developing Countries

Sarah Bryant and Steve Holoviak
Additional contact information
Sarah Bryant: Shippensburg University of Pennsylvania
Steve Holoviak: Shippensburg University of Pennsylvania

No 1119, International Trade and Finance Association Conference Papers from International Trade and Finance Association

Abstract: The goal of this research is to test a new investment model in developing countries. Many articles challenge the logic of investments by the World Bank or The International Monetary Fund in developing countries. For the most part, the basis for investments in poor economies has been linked to the "factors of production" model. However, there has been a hypothesis put forth by Hidalgo, et. al., of a model that approaches the economic analysis from a new perspective. The research offers the idea of examining the notion of "closeness" between products by investigating large global export data on categories of goods. It suggests that, for each pair of export groups, there exists an optimal matching of export products such that if a region is good at exporting product "A," it will also be good at exporting product "B," but not "C." In reality, product C may be too far of a reach for the country to "leap" in production. Technologies and infrastructure needs may be lacking without careful planning and strategic planning. However, this difference may not be obvious to donor agencies or country governments without the use of such a model.This paper first gives background into the Hidalgo, et. al., model. It then lists problems with the model to demonstrate that the model needs to be refined to be of full use to policy makers and donors. The third, and as yet incomplete, part of the current paper is to develop a process whereby the record of investment in products can be compared using the suggested model of pairing. Two countries, Ghana and Viet Nam, have been chosen for initial study to determine their levels of development along the lines of the model, and to compare that development with what has been encouraged by donor agencies over time. If the probability is high between two products, those products have a "short" variance between them. If the probability is low; the products are not well paired. This research aims to set up a method to test existing country exports against newer investment according to the hypothesis and see if the probabilities are high or low. In effect, the aim is to post facto see if it were a so called "good idea" to invest in product B.This paper was presented at the 18th International Conference of the International Trade and Finance Association meeting at Universidade Nova de Lisboa, May 22, 2008, in Lisbon Portugal.

Date: 2008-08-06
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bep:itfapp:1119

Access Statistics for this paper

More papers in International Trade and Finance Association Conference Papers from International Trade and Finance Association
Bibliographic data for series maintained by Christopher F. Baum (baum@bc.edu).