Additional factors which might be considered when examining the impact of Foreign Direct Investment on economic growth. Using Brazil as a case study.
Brazil has received notable levels of inward investment over the past few decades which has not resulted in the higher growth rate as economic theory would assume. Often the negative impact of Foreign Direct Investment (FDI) is attributed to the state of various factors of the market, such as the role of institutions and government policy or the deficient absorptive capabilities of local labour.
Current literature suggests it is the strategic link to several dependant variables which will influence the successful impact of FDI on the economy. This paper accepts this premise and develops the theory further, by suggesting there are additional factors or characteristics of FDI which will facilitate the needed strategic links to the dependant variables. Ignoring these characteristics may lead to the strategic links not eventuating and therefore, the resulting benefits on economic growth not occurring.
This paper argues it is the mode in which FDI was attracted to Brazil, which failed to allow the benefits of FDI to be fully realised. This paper further suggests, there may be sectors within an economy which will allow the dependant variables of FDI to develop more than other sectors.
This paper concludes that little focus to date has been offered to these additional factors and their impact on economic growth. Given their significance in the case of Brazil, further detailed analysis across several countries is required to support the initial theory.
The structure of this paper is as follows; Section 1, presents a summary of the literature in FDI and economic growth theory; Section 2, outlines Brazils approach to FDI and outcomes; Section 3, provides analysis and discussion of the issues focussing on mode of FDI and sector of investment; Section 4, presents some concluding comments.
Section 1: FDI and Growth theoryFDI enhances economic growth because it substitutes domestic...
More Development Studies
essays:
Globalisation of The Economy and The Nation State
... this variable is measured as the share of imports plus exports in GDP. Capital market integration is captured by using (1) the volume of actual capital flows (Swank examines the policy effects of total capital flows, foreign direct investment (FDI), and ...
Economics, Politics and (International) Political Economy: The Need For a Balanced Diet in An Era of Globalisation
... welfare functions. Compensation strategies do not automatically prove unattractive to foreign direct investment (FDI). While increased capital mobility is a major characteristic of the ...
Corruption and its Impact on Economic Growth and Development.
... Which theory actually prevails is a matter of controversy which is taken up next section where an econometric model is constructed to empirically test the link between corruption and development. Thesis Statement: Corruption negatively impacts economic growth ...
Impact of Trade Liberalization on Developing Countries.
... often explicitly), the assumption of advocates of liberalization is that foreign direct investment will naturally move in to take advantage of large pools ... large, economic theory would suggest that government enforcement ...
WTO and China
... of products in international markets, such as garments and electronics, despite the opening of new opportunities in trade and investment. Since 1993, Foreign Direct Investment (FDI) inflows ...
Assignment on Impact of Unemployment in US Economy
... rents that vary over time is an important contributionto the theory of fluctuations in the job-finding rate. When rents earned by employersare high, firms will invest more heavily in recruitment efforts and the market will tighten ...
What do you see as the principal economic challenges faced by China and how might these be addressed?
... and foreign direct investment slowed significantly in 1998. Doubts have been cast on the effectiveness of the governments control over capital movement (Institute of Economics 1998 ...
Negative Effects of Privatization
... MBA student has been read in the library's reservation section. The articles in well known journals and economy newspapers are ...