In development literature Foreign Direct Investment (FDI) is traditionally considered to be
instrumental for the economic growth of all countries particularly the developing ones. It
acts as a panacea for breaking out of the vicious circle of low savings low income and
facilitates the import of capital goods and advanced technical knowhow. This book delves into
the complex interaction of FDI with diverse factors. While FDI affects the efficiency of
domestic producers through technological diffusion and spill-over effects it also impinges on
the labor market affecting unemployment levels human capital formation wages (and wage
inequality) and poverty furthermore it has important implications for socio-economic issues
such as child labor agricultural disputes over Special Economic Zones (SEZ) and environmental
pollution. The empirical evidence with regard to most of the effects of FDI is highly mixed and
reflects the fact that there are a number of mechanisms involved that interact with each other
to produce opposing results. The book highlights the theoretical underpinnings behind the
inherent contradictions and shows that the final outcome depends on a number of
country-specific factors such as the nature of non-traded goods factor endowments
technological and institutional factors. Thus though not exhaustive the book integrates FDI
within most of the existing economic systems in order to define its much-debated role in
developing economies. A theoretical analysis of the different facets of FDI as proposed in the
book is thus indispensable especially for the formulation of appropriate policies for foreign
capital.
