Economics, Ethics and Public Policy
Chapter 7: The inputs: commercial presence
Land only crosses the national frontiers when Singapore buys landfill from Indonesia and China cedes a disputed island to Vietnam. Other factors of production are more mobile. Chapter 7 is about capital. Chapter 8 is about labour. The world has developed beyond theories of comparative advantage which explain the gains from trade in the language of fixed domestic endowments. Nowadays it is inputs as well as outputs that are leaving home in pursuit of higher productivity elsewhere. Commercial presence in health services is, worldwide, still marginal. The share of inward foreign direct investment (FDI) in health as a proportion of total inward FDI in services is believed to be low, at around 0.2 per cent for developed countries and 0.1 per cent in the Third World (Herman, 2009: 15). The growth rate tells a different story. FDI in healthcare is catching up. This chapter is on health-related commercial presence. It is divided into four sections. Section 7.1, ëMarket and hierarchyí, explains why business firms exist. Section 7.2, ëForeign investmentí, says why healthcare suppliers choose to establish treatment centres abroad. Section 7.3, ëIllustrations and examplesí, studies cases to make the principles clear. Section 7.4, ëPolicy inferencesí, establishes what governments can do both to attract direct investment and to ensure that foreigners respect the host nationís priorities.
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