Facts and Fallacies About Foreign Direct Investment
UC Davis Working Paper No. 98-04
Posted: 15 Jul 1998
Date Written: February 1998
Abstract
This paper begins with a summary of the major trends in foreign direct investment over the 1980-1995 period. Following that we present five fallacies, dealing with: the magnitude of foreign investment in Japan; the impact of FDI on the U.S. and Japanese trade balance; the extent to which multinational corporations control U.S. trade; the impact of exchange rate movements on foreign investment flows; and finally, the impact of FDI on welfare of the host country. The paper concludes with a further analysis of the recent trends in foreign investment and their implications for the competition faced by U.S. firms on international markets.
JEL Classification: F21, F23
Suggested Citation: Suggested Citation