This is a preview. Log in to get access Show Abstract The flow of foreign direct investment into developing countries varies greatly across countries and over time. The political factors that affect these flows are not well understood. Focusing on the relationship between trade and investment, we argue that international trade agreements-GATT/WTO and preferential trade agreements (PTAs)-provide mechanisms for making commitments to foreign investors about the treatment of their assets, thus reassuring investors and increasing investment. These international commitments are more credible than domestic policy choices, because reneging on them is more costly. Statistical analyses for 122 developing countries from 1970 to 2000 support this argument. Developing countries that belong to the WTO and participate in more PTAs experience greater FDI inflows than otherwise, controlling for many factors including domestic policy preferences and taking into account possible endogeneity. Joining international trade agreements allows developing countries to attract more FDI and thus increase economic growth. Journal Information The American Journal of Political Science (AJPS), published four times each year, is one of the most widely-read political science journals in the United States. AJPS is a general journal of political science open to all members of the profession and to all areas of the discipline of political science. JSTOR provides a digital archive of the print version of American Journal of Political Science. The electronic version of American Journal of Political Science is available at http://www.blackwell-synergy.com/servlet/useragent?func=showIssues&code;=ajps. Authorized users may be able to access the full text articles at this site. Publisher Information The Midwest Political Science Association, founded in 1939, is a national organization of more than 2,800 political science professors, researchers, students, and public administrators from throughout the United States and over 50 foreign countries. The association is dedicated to the advancement of scholarly communication in all areas of political science. Each year the association sponsors a three-day conference of political scientists in Chicago for the purpose of presenting and discussing the latest research in political science. More than 2,000 individuals participate in this conference, which features 300 panels and programs on politics. The MPSA is headquartered at Indiana University. For further information, contact William D. Morgan, Executive Director, email: . Rights & Usage This item is part of a JSTOR Collection. Recommended textbook solutions
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Why might a host country intervene in foreign direct investment quizlet?Obtain Resources and Benefits: Beyond balance-of-payments reasons, governments might intervene in FDI flows to acquire resources and benefits such as technology, management skills, and employment. Investing in other nations sends resources out of the home country and lowers investment at home.
What are reasons why the government is encouraging foreign investment in the country?By acquiring a controlling interest in foreign assets, corporations can quickly acquire new products and technologies, as well as sell their existing products to new markets. And by encouraging foreign direct investment, governments can create jobs and improve economic growth.
Which of the following are main drivers of foreign direct investment?Accordingly, FDI is driven by four main factors: (i) markets; (ii) assets; (iii) natural resources; and (iv) efficiency seeking.
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Which of the following is a reason behind intervention by a host country on matters related to fdi?
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