The Capital Intensity of Technology and Foreign Direct Investment in the Third World: An Empirical Analysis

This paper tests the hypothesis that the presence of foreign direct investment (fdi) raises the capital-intensity of technology in the Third World. If this hypothesis is accepted, it may he because multinationals (MNCs) adopt a more capital-intensive technology or because mnc's might tend to invest in the more capital-intensive sectors of manufacturing. Evidence presented in this paper shows that the capital-intensity of technology is a positive function of the level of fdi, but the evidence is inconclusive that MNCs tend to invest more in the relatively capital-intensive sectors of manufacturing.