Determinants of International Flows: an Analysis of Foreign Direct Investment and Export

During the last two decades foreign direct investment(FDI) in the world economy has increased 10 times, while trade increased by a factor of 3. Theseinternational flows have been perceived vital foreconomic growth. The first chapter of the bookexplores characteristics of transition economies thatattract FDI while the second deals with exports oflabor-intensive products from developing countries. From the beginning of the transition processexpectations were that very well educated labor forceand relatively low labor costs will be the mainattractive forces. Surprisingly, experience has shownthat this has not happened. Results of this analysisprove that only after transition process has reachedcertain level, low labor costs become significant forFDI inflows. Further, this work also shows that theabundance of low skilled labor (as expected), butalso of capital and the state of transportationinfrastructure are crucial for success in export oflabor-intensive products. This analysis sheds lighton the important questions of FDI and trade, andshould especially be useful to researchers, or anyonewho may have intellectual interest in contemporaryinternational issues.