Following substantial policy reforms in many countries, the past decade
has been characterized by a remarkable increase of long-term private
capital flows to the developing world. However, the bulk of these
investments has concentrated on a few economies at the intermediate
level of the international income distribution, while the large number
of low-income countries has been mostly neglected by international
investors. Starting from these observations, International Investment,
Political Risk, and Growth analyzes the potential growth effects of
liberalizing investment regimes in developing economies and offers an
explanation for the apparent bias of private capital flows towards
middle-income countries. It demonstrates that the removal of investment
barriers may liberate an economy from a vicious circle of poverty,
unproductive saving, and low growth, and presents a novel approach to
analyzing the role of political risk as a major impediment to greater
private capital inflows. Offering a combination of theoretical models
and empirical analysis, and discussing both the historical evidence and
the recent literature, this book contributes to a better understanding
of the determinants and consequences of international investment in
developing countries.