There is a vast body of literature to show the cause-and-effect relationship between trade openness of a country and the growth of income. The concept that increase of trade results in increase of incomes lays the basis of endogenous, classical and neoclassical theories of growth…
Download file to see previous pages...
This review of literature is directed at finding the measures leading to increased foreign direct investment (FDI) for a country. Although there is a whole range of factors that cause an increase in the foreign direct investment in a country, yet one of the most significant factors has been found to be the country’s openness towards trade. Openness as a concept, has been defined in a number of ways by the researchers in the past. A comprehensive definition of openness is presented below: (t)he concept of openness, applied to trade policy, could be synonymous with the idea of neutrality. Neutrality means that incentives are neutral between saving a unit of foreign exchange through import substitution and earning a unit of foreign exchange through exports. Clearly, a highly export oriented economy may not be neutral in this sense, particularly if it shifts incentives in favor of export production through instruments such as export subsidies. It is also possible for a regime to be neutral on average, and yet intervene in specific sectors. A good measure of trade policy would capture differences between neutral, inward oriented, and export-promoting regimes. (Harrison, 1996, p. 20). Trade openness has conventionally been scaled by different researchers in different ways, but in a vast majority of cases, trade openness has been measured by its contribution to the overall gross domestic product (GDP) of a country. Factors that have conventionally been employed for the measurement of trade openness include but are not limited to intensity of import trade, intensity of export trade, intensity of trade, intensity of adjusted trade, and the intensity of real trade (Squalli and Wilson, 2006, p. 22). Three models of adjusted trade intensity have conventionally been tried to measure the trade openness. One of them is adjusted trade intensity in which the outliers having high import for the re-rexport are handled with the modification of denominator. This measure was first proposed by Andersen (1994). The second of them is adjusted trade intensity accompanied with the alternative technique to tackle the outliers as initially proposed by Frankel (2000). The third of them is adjusted trade intensity. This is a modified form of the model originally proposed by Frankel (2000). The modification was suggested by Li et al (2004). The seven measures of openness were also cited by the famous economists Kumar and Kandzija (n.d., p. 13) in their article in which they analyzed the integration and trade theory to evaluate the perspectives of trade in Western Balkans. For the purpose of this research, intensity of trade, the three models of intensity of adjusted trade as discussed before, real trade intensity, real world trade intensity (RWTI) and composite trade intensity (CTI) will be used. They will be evaluated with a view to identifying the one that is the most accurate as a measure of openness. Of all the measures, three of the most commonly employed are trade intensity (TI), import trade intensity (M/GDP) and export trade intensity (X/GDP). Trade intensity is obtained by dividing the sum of import (X) and import (M) by the GDP. According to Alcala and Ciccone (2004), the estimate generated by TI upon income is affected by the non-tradable on productivity, and is thus, biased downwards. Thus, in their opinion, it is advisable to divide the nominal trade by the real GDP. The different measures of trade openness lay the basis for a technique to find out the extent to which a country is open to the global trade as well as to the consequential advantages of income growth. For instance, the higher a country’s TI, the increased openness of its economy towards the advantages
...Download file to see next pagesRead More
Cite this document
(“The Relationship Between Trade Openness and FDI Literature review”, n.d.)
Retrieved de https://studentshare.org/macro-microeconomics/1391129-the-relationship-between-trade-openness-and-fdi
(The Relationship Between Trade Openness and FDI Literature Review)
“The Relationship Between Trade Openness and FDI Literature Review”, n.d. https://studentshare.org/macro-microeconomics/1391129-the-relationship-between-trade-openness-and-fdi.
The current research suggests that the effects of FDI on economic growth are complex. Their scope and magnitude depend on a number of factors, including the amount of knowledge capital, the complexity of R&D procedures, and even host countries’ financial market size. Current knowledge of FDI and its impacts on economic growth is mainly theoretical.
The paper would be conducted through a perusal and examination of important ideas and concepts in books and journals. The book sources would be used to identify the core concepts and ideas. The journals will be employed to examine important changes and studies that have been done about the two concepts in order to identify current trends and elements.
Globalization is a significant but not a new economic phenomenon. World Bank throws out that there were three main globalization waves since 1870 where the global economy, capital flow and migration have been increasing dramatically.
From a humble beginning of 100 foreign-owned firms in the year 1979, China rapidly catapulted to a position of one of the most attractive destinations for foreign investment. By the year 1998 the number grew to as many as 280,000 (Facts and details, 2012).
Various reasons have been identified that contribute to the existing level of poverty in these countries. The SSA countries can be classified according to their level of participation in the international trade. Some countries in this region exhibit higher degree of openness while others have very low level of openness.
The individual practices that constitute human resource management support one another in enhancing certain workforce characteristics, which create combined synergistic effects that are substantially great, compared to the individual practices (Sels, Winne, Delmotte, Maes, Faems and Forrier, 2006).
However, the modern day corporations are characterised by the separation of management and ownership. The decision making power and the control of the firm remains with the management, whereas the stockholders are expected to be benefitted by the decision taken by the managers.
As a result of this agreement, the trade regime of Vietnam entirely changed as this included provisions on goods and services, enforcement of intellectual rights and therefore, it allowed Vietnam to be given an entry into the World Trade Organization. Vietnam was given unconditional normal trade relations with the united states after an agreement with the then President of the USA; President Bush.
As a matter of fact, an increase in world trade leads to a prominent rise in world output for the reason that a country becomes involved in trading activities with the world more in the period of economic boom than in the period of recessions. A country tends to export more when it experiences an increase in output and vice versa (Motley, 2005).
I would suggest that the government of India look into the retail FDI regulations for it is an important aspect of the current economic scenario in India. It has been observed that arrival of organized retail supported by foreign direct investment, have posted immerse growth in the retailing sector. The problem of regulation of the FDI retail will limit private funds from overseas into products and services.
1 Pages(250 words)Coursework
GOT A TRICKY QUESTION? RECEIVE AN ANSWER FROM STUDENTS LIKE YOU!
Let us find you another Literature review on topic The Relationship Between Trade Openness and FDI for FREE!