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Competition for Multinational Investment in Developing Countries: Human Capital, Infrastructure, and Market Size

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Competition for Multinational Investment in Developing Countries: Human Capital, Infrastructure, and Market Size This PDF is a selection from a published volume from the National Bureau of Economic Research Volume Title: Challenges to Globalization: Analyzing the Economics Volume Author/Editor: Robert E. Baldwin and L. Alan Winters, editors Volume Publisher: University of Chicago Press Volume ISBN: 0-262-03615-4 Volume URL: http://www.nber.org/books/bald04-1 Conference Date: May 24-25, 2002 Publication Date: February 2004 Title: Competition for Multinational Investment in Developing Countries: Human Capital, Infrastructure, and Market Size Author: David L. Carr, James R. Markusen, Keith Maskus URL: http://www.nber.org/chapters/c9544 10.1 Introduction Globalization is a complex process about which little can be said confi- dently without sustained and systematic empirical investigation into its sources, channels, and effects. Unfortunately, both avid critics and sup- porters of globalization processes tend to argue on the basis of anecdotes, which are always available to support a particular case. One of the more significant complaints about multinational enterprises is that, when locat- ing in developing countries, they look for countries with weak labor rights. Such conditions presumably permit firms to exploit local workers by pay- ing them less than some notion of a fair wage. Given the breadth and com- plexity of the world economy, claims of this kind can be misleading and may support faulty policy prescriptions. Thus, economists look for sys- tematic evidence in large data sets and use statistical techniques to identify underlying regularities amidst the noise. The purpose of this paper is to give a broad outline and discussion of what knowledge we may claim with a reasonable degree of confidence about the patterns and determinants of foreign direct investment (FDI) flows to developing countries. We restrict the analysis to long-term direct investment and do

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