Foreign Direct Investment into Open and Closed Cities

Kristof Dascher

MPRA Paper from University Library of Munich, Germany

Abstract: This paper argues that the more open a city is to immigration, the more likely it is to welcome -- and hence also receive -- foreign direct investment. If immigration is allowed to complement the inflow of foreign capital, urban rent rises by more. This extra rise in rent aids in appeasing owners of capital specific to local traditional industries who else become worse off as foreign direct investment flows in. The paper's model may help give a simple alternative explanation of why urban centers such as Hong Kong, Singapore, Dublin or many cities on China's Eastern coast have received so much more FDI per capita. These cities could draw on a nearby pool of extra labor that -- by driving rents up and keeping wages down -- may have been decisive in the political struggle over whether to let foreign direct investors in.

Keywords: Foreign Direct Investment; Open City; Immigration; Urban Rent (search for similar items in EconPapers)
JEL-codes: F11 F23 R23 (search for similar items in EconPapers)
Date: 2013-08-08
New Economics Papers: this item is included in nep-mig, nep-sea and nep-ure
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https://mpra.ub.uni-muenchen.de/49197/1/MPRA_paper_49197.pdf original version (application/pdf)

Related works:
Journal Article: Foreign Direct Investment into Open and Closed Cities (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:49197

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