Domestic and foreign investing
Date posted: November 16, 2011
It’s often easy to look at things as a zero-sum game — that is, if I win you lose. But the world doesn’t always work like that, and there can be many win-win situations. A new study found such a win-win in international trade. N.C. State University economist Mike Walden explains.
“Well … I think most people are certainly aware and, in fact, this is an issue with many people that there has been an increase … in investment in foreign countries by U.S. companies.
“U.S. companies have increasingly opened factories and other facilities in … foreign countries. And many people who observed that or see that, I think, look at it in terms of a zero-sum game — that is to say, if … company X opens a factory in … France that must mean that they … would not have opened that factory here in the U.S. So, the jobs that would have been here go to France instead.
“Well, a couple of economists who work … for a very prestigious think tank actually put this idea to the test, and they looked at data on investments by … U.S. companies who are investing in foreign countries, and they do that to the detriment of investing in the U.S. And they found that the answer is actually no — that is to say that companies that are investing in foreign countries are also investing here in the U.S. so it’s not a zero-sum game.
“Now what they did find, though … was that if you looked at this on a job basis or in a percentage of dollar bases, what they did find is that the investments in the foreign countries were not one-to-one with domestic investment. That is, there was a greater investment in terms of jobs and dollars invested in the foreign countries than there was here in the U.S.”
Category: Economic Perspective