8 Government Regulation Slides

8 Government Regulation Slides - Capital Flow Model The...

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Capital Flow Model: The Assumptions --Only Capital Moves --Technology and Management Skills Available at Market Prices --All Labor is Alike --Labor is Fixed and Fully Used
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Capital Flow Before After Host Country Labor 1 1 + 2 + 3 Host Country Capital 2 + 4 4 Foreign Capital <5 (elsewhere) 5 1 2 3 4 5 Local Capital Foreign Capital Price of Capital Before After Amount of Capital
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Host Country Government Concerns - Is the Price for Resource Transfer Equitable? - Will the Country Be Able to Handle the Balance of Payments Effects? - What Will Be the Effect on Competition in the Local Market? - Will Foreign Investment Diminish National Sovereignty?
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Equitable Prices for Resources Capital (Portfolio vs. Direct Investment) - Can Local Firms Have Access to World Financial Markets? - What Access Does Government Have? Technology - How Many Sources of the Foreign Technology? - Can the Government Easily See if the Price is Fair? - Do Firms Transfer ‘Proper’ Technology?
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