Kaczmarczyk, P. and Flassbeck, H. (2023) Foreign direct investments and the dynamics of trade and capital flows: Schumpeterian insights for sustained development. Global Policy, 14 (3). pp. 477-488. ISSN 1758-5880
Abstract
This article analyses the role of foreign direct investment (FDI) in trade and development theory and outlines the resulting implications for economic policy. We propose an alternative model of international trade and development based on absolute, not comparative advantages of firms, which are nested in countries but compete internationally. Applying a Schumpeterian theory of dynamic development, we consider how firms can either increase their competitiveness through productivity gains at a given wage level, or by combining the existing high level of productivity with lower wages in low-income countries. We argue that the aim of competition policy must be to improve the quality of economic competition in international markets, limit monopoly rents and disincentivise rent-seeking activities through the mere outsourcing of production. To that end, we propose that economic policy must reinstate rigorous wage bargaining regimes and make FDI subject to wage conditionality, obliging foreign companies to increase their wages in the host economy in line with average national productivity growth and the national inflation target.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2023 The Authors. This is an Open Access article distributed under the terms of the Creative Commons Attribution Licence (https://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Politics and International Relations (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 26 Apr 2023 08:54 |
Last Modified: | 02 Oct 2024 15:43 |
Status: | Published |
Publisher: | Wiley |
Refereed: | Yes |
Identification Number: | 10.1111/1758-5899.13209 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:198513 |