TY  - JOUR
AU  - Razin,Assaf
AU  - Mody,Ashoka
AU  - Sadka,Efraim
TI  - The Role of Information in Driving FDI: Theory and Evidence
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9255
PY  - 2002
Y2  - October 2002
UR  - http://www.nber.org/papers/w9255
L1  - http://www.nber.org/papers/w9255.pdf
N1  - Author contact info:
Assaf Razin
Department of Economics
Cornell University
Uris 422
Ithaca, NY 14853
Tel: 607/255-9625
Fax: 607/255-2818
E-Mail: ar256@cornell.edu

Ashoka Mody
European Department
International Monetary Fund
700 19th Street, NW
Washington DC 20431
E-Mail: amody@imf.org

Efraim Sadka
Tel Aviv University
Eitan Berglas School of Economics
P.O.B. 39040
Ramat Aviv, Tel Aviv, 69978, ISRAEL
E-Mail: sadka@post.tau.ac.il
AB  - We develop a simple information-based model of FDI flows in which the abundance of  intangible' capital in the source countries, which generates expertise in cream-skimming investment projects in the host countries and enhances FDI flows. Corporate transparency in the host countries, on the other hand, diminishes the value of this expertise and thereby reduces the flow of FDI. Empirical evidence (from a sample of 12 source countries and 45 host countries over the 1980s and 1990s) which is analyzed in a gravity equation model provides some support to our theoretical hypotheses. The gains from FDI in the host country in our model are reflected in a more e.cient size of stock of domestic capital and its allocation across firms. These gains depend crucially (and inversely) on the degree of competition among FDI investors.
ER  -