Economics%20116%20-%20Lecture%209%20-%20Initial

Economics%20116%20-%20Lecture%209%20-%20Initial - Economics...

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Economics 116: Economic Development UC San Diego, Spring 2009 Prof. Karthik Muralidharan Department of Economics Lecture 8
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Administrative Stuff Problem Set 2 will be posted by end of today Both conceptual questions as well as calculation-based problems Second midterm WILL have some calculation- based problems Will be put up in 2 parts like last time First part today, second part on Friday, solutions on Monday Midterm next Thursday (7 May) No lunch this week Office hours as usual (Wed, Thu: 4-5 pm)
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Lecture Outline (4/23/09) Wrap up on Trade, FDI, etc FDI and Technology Transfer Three views on trade and development Human Capital – Education Mechanisms connecting education to growth Human Capital Theory Returns to Education Improving Education in Developing Countries
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Foreign Direct Investment (FDI) What is FDI? Direct Investment by a foreign firm in productive capacity in a different country Could be a fully-owned subsidiary or a joint venture Main reasons for FDI are: Cheaper access to domestic market (transport, duties, etc) Cheaper venue to produce for global market FDI versus FII (Foreign Institutional Investment) FII usually refers to pure financial
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Recent History of FDI Many countries (including India and China) moved from being closed to FDI in the 60s and 70s (and chasing away foreign firms) to welcoming them in the 80s and 90s Why were they closed in the beginning? Why did they reverse this policy?
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FDI and Technology Transfer While it is true that foreign firms can sometimes dominate local markets – most of the factors of production they use are local Labor, materials, services If they bring the most productive technologies with them, it becomes an effective way to accelerate the productivity of domestic workers The learning spillovers made possible by the FDI generate positive externalities New companies, increased returns to education, better awareness of global standards of management and production, learning by doing for joint venture partner May even be worth subsidizing entry! GE and India
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Lecture Outline (4/23/09) Wrap up on Trade, FDI, etc FDI and Technology Transfer Three views on trade and development Human Capital – Education Mechanisms connecting education to growth Human Capital Theory Returns to Education Improving Education in Developing Countries
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Trade as Enemy of Growth Would be true if the Matsuyama model was
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This note was uploaded on 05/06/2010 for the course ECON ECON 116 taught by Professor Muralidharan during the Spring '09 term at UCSD.

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Economics%20116%20-%20Lecture%209%20-%20Initial - Economics...

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