Foreign investment and urban development: A perspective from tourist cities

While most of the economists defend the positive role of foreign investors in economic development, the literature addressing urban settings show divergent views on the local impact of foreign investment. The author takes the approach of political economy, illustrating how the interests and preferences of foreign investors and the host community on the openness of a tourist city greatly diverge in the presence of side effects. Foreign investors tend to influence the tourist city’s policy to exhibit a higher degree of openness than is optimal. So it is the government’s responsibility to regulate foreign investment in a way that is conducive to the tourist city’s sustainable development. Macao is adopted as a case study.