II. A THEORETICAL MODEL OF INVESTMENT WITH FDI............................................ 6

We wish to thank Sanjaya Lall, Karl Sauvant and Zbigniew Zimmy for their useful comments on an earlier draft. Part of this work was undertaken on behalf of UNCTAD as an input into the World Investment Report, 1999. UNCTAD/OSG/DP/146- ii-The opinions expressed in this paper are those of the authors and do not necessarily reflect the views of UNCTAD. The designations and terminology employed are also those of the authors. UNCTAD Discussion Papers are read anonymously by at least one referee, whose comments are taken into account before publication. Comments on this paper are invited and may be addressed to the authors, c/o Editorial Assistant*, Macroeconomic and Development Policies, GDS, United Nations Conference on Trade and Development (UNCTAD), Palais des Nations, CH-1211 Geneva 10, Switzerland. Copies of Discussion Papers and Reprint Series may also be obtained from this address. New Discussion Paper