Quid Pro Quo Foreign Investment

Bhagwati, Jagdish N.; Dinopoulos, Elias; Wong, Kar-Yiu

This article discusses about issues related quid pro quo foreign investment. The theory of international trade took off in two major directions in the 1980s. First, while the 1950's through the 1970's had witnessed major developments in the theoretical analysis of factor market imperfections, the 1980s were marked by the theoretical exploration of product market imperfections. Second, trade theorists participated in pioneering the revolutionary shift in economic theorizing that has brought political processes explicitly into the analysis of economic phenomena and policy. The political-economy-theoretic reformulation and explanation of the classic questions of international economics continue to grow apace. Their analysis therefore produced an argument for intervention to encourage quid pro quo capital outflow, while the firm-level outflows were determined entirely by atomistic, myopic firms. Economic theorizing often proceeds from casual empiricism. The theorizing of the quid pro quo DFI phenomenon is no exception.



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American Economic Review

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September 7, 2012