The Impact of Investment Policy in a Changing Global Economy: A Review of the Literature

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Business Regulation in South Asia and the Belt and Road Initiative

“…FDI is most wanted in developing countries, as it is considered a stimulating engine for economic growth, complementing domestic investment (Jude and Silaghi 2009). FDI brings in additional technology and diversifies exports (Echandi, Krajcovicova, and Qiang 2015), both key determinants of prosperity in any country dependent on the technical knowledge embedded in the goods and services it exports (Hausmann, Hwangand, and Rodrik 2007). Most importantly, foreign investments have the potential to create jobs across a range of skill categories, including in midand high-skill occupations, which are of high relevance for South Asian countries.…”

The Impact of United States Tax Policies on Sectoral Foreign Direct Investment to Asia

“…The economic literature on cross-country studies which include emerging markets, in contrast, suggests that tax rates are generally not a priority consideration for investors when deciding about location. 8 Studies on emerging markets show that once other factors are considered-such as the size of the market, availability of natural resources, business environment, and host country potential for demand growth-tax differentials between the guest and the host country tend to be unimportant (Echandi, Krajcovicova, and Qiang 2015;James 2009). Instead, research finds that emerging markets that strive to improve the quality and variety of their products can attract FDI, regardless of tax regime.…”

Effects of FDI on High-Growth Firms in Developing Countries

“…While compulsory local content requirements are sometimes used, they can discourage the entry of foreign investors and, more important, preclude altogether the entry of foreign technology that could itself be the source of positive spillover effects. In practice, these requirements are also often circumvented by foreign companies, rendering them largely ineffective (Echandi, Krajcovicova, and Qiang 2015;Hufbauer, Schott, and Cimino-Isaacs 2013).…”