A model of FDI spillover in a natural resource rich LDC

摘要

Resource rich developing countries (RR-LDCs) have historically not been the recipients of positive "spillover" effects from foreign investment in their resource rich sectors. A common explanation for this outcome is that the investors have no incentive to accept domestic trade-related performance requirements that may not represent their comparative advantage. Furthermore, the existence on non-transparent local government transactions in RR-LDCs are conducive to large side payments which have receptive governments that want to "cash out" from their political positions. [McPherson and MacSearraign, 2007]. In this paper we develop a formal theoretical economic model explaining the non-existence of positive "spillover" effects in RR-LDCs. Our focus is on the extractive oil sector.1