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Economic Growth with Foreign Capital
Author(s) -
Thompson Henry
Publication year - 2008
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/j.1467-9361.2008.00395.x
Subject(s) - economics , foreign direct investment , foreign capital , capital accumulation , investment (military) , capital (architecture) , monetary economics , convergence (economics) , foreign portfolio investment , capital deepening , international economics , macroeconomics , capital formation , labour economics , market economy , return on investment , financial capital , open ended investment company , human capital , production (economics) , history , archaeology , politics , political science , law
In growth theory, foreign investment places a small open economy in the international steady state. In applied growth theory, foreign investment is assumed to shift technology. The present growth model separates foreign from domestic capital and develops the steady state where both capital/labor ratios are stationary. A capital scarce country would attract foreign investment and may arrive at a steady state with perpetual foreign investment. Such a steady state foreign investment host is characterized by low saving and high labor growth rates, and source countries the opposite. Incomplete convergence characterizes economic growth with foreign capital.