Luis A. Rivera-Batiz

Economic Integration and Endogenous Growth

In a world with two similar, developed economies, economic integration can cause a permanent increase in the worldwide rate of growth. Starting from a position of isolation, closer integration can be achieved by increasing trade in goods or by increasing flows of ideas. We consider two models with different specifications of the research and development sector that is the source of growth. Either form of integration can increase the long-run rate of growth if it encourages the worldwide exploitation of increasing returns to scale in the research and development sector.

The effects of direct foreign investment in the presence of increasing returns due to specialization

Abstract This paper studies the external effects generated by foreign capital inflows in a small open economy, modeling explicitly the nature of the increasing returns involved. The focus is on the role played by specialized, differentiated business services in manufacturing production and how foreign investment - through its ability to increase the extent of the market and induce greater specialization in producer services - enhances the productivity of nationally-owned industry and raises national welfare. The gains yielded by foreign capital inflows within this context are shown to operate whether the economy is at full-employment or under unemployment. In the latter case, it turns out to be critical that one consider not only the direct industrial employment created by foreign investment but also the induced secondary employment generated in the service sector.

Europe 1992, and The Liberalization Of Direct Investment Flows: Services Versus Manufacturing Francisco L. Rivera-Batiz.

The European integration of 1992, offers to open-up the service sector of EC countries to substantial investment flows from other member nations. This paper studies how the elimination of restrictions on the flow of foreign capital into services affects the economic welfare of a recipient economy. A model of increasing returns due to specialization is developed in which capital is sector-specific; this model is used to examine the differential impact of foreign capital inflows into the service and manufacturing sectors. It is shown that direct foreign investment in the service sector has positive effects on national welfare that investment in manufacturing may lack. [F 15]

International Trade, Capital Flows and Economic Development

The impact of rising global trade and investment remains one of the most controversial topics among academics, policymakers and the public in general. This book written by international economists Francisco L Rivera-Batiz and Luis A Rivera-Batiz offers a collection of articles outlining the diverse consequences of trade liberalization and the elimination of barriers to international capital flows. The co-editors present a rich discussion of the theoretical approaches and empirical evidence available in economics to analyze globalization and its effects on growth, poverty and income distribution. Specifically, the book chapters examine how economic integration influences technological change and growth, the effects on poverty, income distribution and economic development, the consequences of liberalizing foreign direct investment, the impact of capital flows on emerging markets, and the role played by public sector governance and policies on trade and investment liberalization. Overall, this volume adopts diverse scientific approaches in analyzing globalization and its consequences.