Does Foreign Aid increase Foreign Direct Investment?
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Does Foreign Aid increase Foreign Direct Investment? / Selaya, Pablo; Sunesen, Eva Rytter.
I: World Development, Bind 40, Nr. 11, 2012, s. 2155–2176.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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TY - JOUR
T1 - Does Foreign Aid increase Foreign Direct Investment?
AU - Selaya, Pablo
AU - Sunesen, Eva Rytter
N1 - JEL classifications: F21; F35; O19.
PY - 2012
Y1 - 2012
N2 - We examine the idea that aid and FDI are complementary sources of foreign capital. We argue that the relationship between aid and FDI is theoretically ambiguous: aid raises the marginal productivity of capital when used to finance complementary inputs (like public infrastructure and human capital investments), but aid may crowd out private investments when it comes in the shape of pure physical capital transfers. Empirically, we find that aid invested in complementary inputs draws in FDI, while aid invested in physical capital crowds it out. The paper shows that the composition of aid matters for its overall level of efficiency.
AB - We examine the idea that aid and FDI are complementary sources of foreign capital. We argue that the relationship between aid and FDI is theoretically ambiguous: aid raises the marginal productivity of capital when used to finance complementary inputs (like public infrastructure and human capital investments), but aid may crowd out private investments when it comes in the shape of pure physical capital transfers. Empirically, we find that aid invested in complementary inputs draws in FDI, while aid invested in physical capital crowds it out. The paper shows that the composition of aid matters for its overall level of efficiency.
KW - Faculty of Social Sciences
KW - Development aid
KW - foreign direct investment (FDI)
KW - foreign capital for development
KW - aid effectiveness
U2 - 10.1016/j.worlddev.2012.06.001
DO - 10.1016/j.worlddev.2012.06.001
M3 - Journal article
VL - 40
SP - 2155
EP - 2176
JO - World Development
JF - World Development
SN - 1873-5991
IS - 11
ER -
ID: 38176850