Lecture+9a - Lecture 9 Foreign direct investment We...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Lecture 9:  Foreign direct investment We finished yesterday with a discussion of the Transnationality Index or TNI, which I  was using as a proxy for the extent to which the economy is being globalized.  One of the three  components of the TNI is percentage of total assets held abroad, which includes foreign direct  investment (ownership of foreign subsidiaries) and other kinds of assets, such as owning shares  of stock in a foreign company you don’t control (as in buying stock in Toyota).  For the rest of  today, I want to focus on assets held in other countries, and specifically on the most dramatic  trends, both over time and across countries, of foreign direct investment in the era of  globalization, using the tables on Reader pages 62 and 63 as our data source.  The data cover the  period 1960 to 1994 and so are not that recent, but they to illustrate many of the most important  trends in FDI. 1.  Growth of FDI.   First of all, look at the phenomenal growth of FDI totals worldwide,  from $ 67.7 billion in 1960 to $ 2.4 trillion in 1994.  This is an increase by a factor of 35.  Over  this period, the world’s population almost doubled, but agricultural production grew by a factor  of 2.5, so that food was on average cheaper and more plentiful at the end of this period than at the  beginning.  Over approximately the same time period, as population doubled, economic  production in general about tripled, so there was on average 50 percent more wealth per person at  the end of this period than at the beginning.  More dramatically still, international trade  multiplied by seven over this same time, so it was growing 3  ½  times as fast as population.  Meanwhile, the amount of international investment increased by a factor of 35.  Thus,  international trade was growing much faster than the underlying economy, and international  investment was growing much faster than trade; one dramatic index of the spread of  globalization. 2.    Declining relative share of the US.    Over the 1960-1994 period, US outward FDI  increased by a factor of 19, from $ 31.9 billion to $ 610 billion.  This rate of increase was about  half that of world FDI flows, so that US outward FDI flows constituted a smaller percentage of  the total at the end of that period than at the beginning (25 percent at the end as opposed to 47  percent at the beginning).  The real anomaly here is the 1960 figure, with the US then responsible  for about half the world’s total FDI flow.  This was an artifact of World War II, which damaged, 
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern