Nama Wlla

NIM O4 2011133104
Kelos Ekonomi lnternacional KelasB

INTERNATION AL FACTOR MOVEMENTS

Internatonal capital movements throvah oreign direct investment and mukinational

Corporations
1 pes of tapita movements
Foreign direct ihvastment
Foreigh porteolio inyestment

Foreign direct investment (FDI) refers to a movement capital that involves

of
Owners hip and con-trol.
Foreign porfolio inyeitment
does not involve owners hip or Conbrol but e l o
o whot economists cal " financial capit roter thon real tapital.

Ahoug many reasons for capitol movementr have been Sugga , ll imply
Seeki o a igher rote ot reburn on capital over me We lict and commet
briyly dn several hypotle fes, many o4 which have fovnd empiricod suppo.
.Firms wl nvest abrad in responseo large and rady grvwing makett fer
+hir prducts.
Similaty, because manufacturing ard services producion in de veloped covntries ls caterinn

increasinglyto income tastes and uwnts

high -

it can be hupokesized tkt

,

develop ed Covntry firms

-

will invest oreseas recipien Country hoas a high

Per Capta Income

3. Another reson for direct invatment n a county is thot foreign fi-m

Can secure act ess to minera or raw moteno dposits lotated ere ad can
hen Proces te row materials ad sell em in more tintch ed form.
4Tarites ard nankariyt boriers in h koxt couny aso can induce an inglowg
foreion direct investnent
5. A forein irm may consider investmert in a hast Covny if there are low reblave
wanesin hat cavnkry, 4hogh sdie Indi code that louw waga per se ore nat
AS much an enice ment por F a envisio ned by tk genenml pube
G. Firms also angve hotey nead to invet abroodt t protect foreigh market shane
7. I+ has also b0on cuasted hot tims may ont to inv@st akroad as a men
of risk diesi fication .
. Anoly, zoreign fims moy fird investment In a hast cony t be proltable
e Coase of Some firm-spesific knowledhe or ases tha enble th
to ovtperporm te host County s domerkic tirms
forelgn firm
.

OaE
 scheedls for covntes
Figure 1 pordrayse gim phyClal produet of capr(HPRL)
Iand . T onay asuneu thot uy a r on 2 oauni ine word,
thot ere are only 2 foctors 4 produeon - capital and labor- and both (ovnies

prode a ngle, komogene gondot repretenks k of all qsods pmduced

in the counies.
sektdule plots e ahto
In miroeconomic of capi
e ory,amarqina physical prodet
o v p 4at rat rom adding 1lmore uaib apikal do prodction wh ll
er inpuks are held Constont. wth consbnnt pricer, this shedule con4ber
demond tor capital ingd devied prm k demrd 4er e praduet. Schwdle AB
Shaws te H h cvdy I (NPP) for varias laral of capibal stock Mraured in
a rightuand ArecAon f rom orlin 0.
Anologouy, schedole AB' indotes u MFKn country 1 (NPK),
wih elevels of capitl stock maiud lund trom ortmin 0

HPP MIP
A

Capita
A wide variehy qbenegiks may ra rm an inglou 0 prgn direct iwestrme.
Realith on af Scale economie
Incrraed odput
Increased wones Provtsion q technical and manogprtl skils and
of new technoby
Incres employrmer
Incresed exporks Weakeniny Pouwr domstic mnopo
ncreased x revenvs

wwnt hepfens is hotte contry's recorded termm q4 trode ae warsekAn ey wou

ave been if a tra Market price were Used for theie tran cacionu

Decreased domestic savig

Decreased domaric inrestmert
Instabily in de alane of payments and e exckonge rate
control ovor domesbc polucy
Lost o
Increaed ynemployment
'Estabichnorrt o4 local monopoy
Inadequote atterton to the deve bpment of local edvcation and skills .
 atc
Labor Harket enilbrium The o
Contry CAse
WL,H
,HP
HPPLTI

Wev
WI

Labor
Th demond for lbbor in coundry L
( HePLL
from =DI)
lut and i grophed
demond for loor in ountry I (te
MPPLa DI) B qaphed from k
Hjt
»

Th t n suppy o labor ayalbb k in both toumies i indicated

axis 00'
loy lanth q koizoal
lalor mar kets are workig pertecty and lere are no barlers to
.

lalo Movements, Labor wil Movebetueen covien util e MPp labor (od thus
wane is eewhee e same. This occurs at
peimt A whe resutim eavilibium
, o 0L aor is emplayad in
countrI and Lr0labor i employ in

Th Etect lborHigmtion in e Case o Surpl« lobor

W
w'ey
Lobor
Fiour 4 Te arouth Effectr Lakor Market Adjustment ard Migroio
Avtas
Avtas

toTexles To TL Texblu
OE
 T moremek o labor from tountry L to covnty I i« indicatedy te ovuard shipt
o te PPF for counry I and th inuord shit y P?r for country I. Ass ume tat
County L is the lakor- obundont countr xporinm o e labor -inters ire good(texles )
and imporin t capital nten sive 4ood (artot prior t be bbor mlnration and
hed th 2 Counties in ustbon ae Small countnes. Th Rubcznski horon indi cates
that his wil lead
chanee in relative labor suppliey county Io contraed Produebom
Dtextuls (tk labor - inte nsive apod) from to o and eand prodlueon of avto
to
4rom ao
. Counry L, 4k other hand will expancl produethon o4 kex4les
on

from To to T with k
newly acquird lobor and redyce prodwedaon qf auvtos
rom Ao t A. Both production adistments are ukra -astrode in nawrt sinct
fador flows have in efert Substited or trode plows.

Te Ffes of Hiaant Woge Discrimination

Domestic

SDomesic +5 migrnts

Wone

L
Laber
Te Im Mlg oion O4 labor leads to a aheard
sht In th laor suppla curve
all labor in h market wone 0w
Prodcin a new
eauilbrium wage,ow, _pyn
and ten subsidizim each ot k initiel. oL, demeshc worktr by amour ,Wa
domeric labor is legt no worse nd producergai ns a net Surpls Of
ar A BC Tk aln can take plac Only ig the prodacer ca
eHive y
dis criminrte betw an domesic hduet workers