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Foreign investment and migration: analytics and extensions of the basic model.
Keio Economic Studies
|January 1, 1990
Summary
This study examines international factor mobility, revealing the Ramaswami effect where a home country may buy out foreign factors. It explores conditions that limit this to a partial or no acquisition, considering differing technologies and immobile factors.
Area of Science:
- International Economics
- Factor Mobility Theory
- Trade and Development
Background:
- The basic model of international factor mobility is foundational in economic theory.
- The Ramaswami effect describes a tendency for a home country to acquire foreign factors of production.
Purpose of the Study:
- To provide a unified approach to international factor mobility.
- To generalize the Ramaswami function and analyze its implications.
- To explore factors mitigating complete foreign factor acquisition.
Main Methods:
- Utilized new graphical techniques alongside algebraic exposition.
- Generalized the Ramaswami function to explore varying scenarios.
- Analyzed models with differing country technologies and immobile factors.
Main Results:
- Confirmed the persistence of the Ramaswami effect, driving towards near buy-outs.
- Identified mitigating forces leading to partial or no foreign factor acquisition.
- Demonstrated the impact of technological differences and immobile factors on optimal strategies.
Conclusions:
- The Ramaswami effect's tendency for buy-outs is persistent but not absolute.
- Optimal strategies for international factor mobility depend on country-specific factors.
- The model offers a nuanced understanding of international factor market dynamics.