Foreign capital inflow and economic growth in LDCs

Abstract

The implications of foreign capital inflow are re-examined in a neoclassical model of economic growth (a la Chow-Zeng, Applied Economics Letters, 8, pp. 613–15, 2001). By following the definition of the steady state stock of aggregate capital, it is shown that under normal depreciation of foreign capital and the natural rate of growth of labour force, an inflow of foreign capital may or may not increase the per capita domestic capital and consumption of the host nation.