THE EFFECTS OF MULTINATIONAL ENTERPRISES INVESTMENT IN THE NONTRADED SECTOR OF DEVELOPING ECONOMIES

Abera Gelan ()
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Abera Gelan: University of Wisconsin-Milwaukee

Journal of Economic Development, 2004, vol. 29, issue 2, 41-64

Abstract: This paper draws attention to the implications of multinational enterprises (MNEs) investment in the nontraded sector of a developing host country when their investment is characterized by the transmission of superior technology, but also draws on the local capital market to secure factors of production. In a simple general equilibrium model, we show that once the MNEs control the nontraded sector, their activities generate disturbing results for the host country¡¯s economy. In particular, the host country may experience reduced total employment and real national income as a result of their investment. The cause for such unsettling outcomes is directly related to the MNEs utilization of their sector-specific stock of knowledge-based assets in the production of nontraded goods.

Keywords: Foreign Direct Investment; Knowledge-based Assets; Multinational Enterprises; Nontraded Good (search for similar items in EconPapers)
JEL-codes: F10 F23 O10 O19 (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:jed:journl:v:29:y:2004:i:2:p:41-64

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