Multinational Enterprises, Foreign Knowledge and Host Country

Authors

  • Andrzej Cieślik University of Warsaw

DOI:

https://doi.org/10.12775/EQUIL.2012.001

Keywords:

capital inflows, foreign knowledge diffusion, multinational enterprises, wages

Abstract

In this paper we study how the expansion of multinational enterprises in the host country affects its wages using a general equilibrium factor specific framework for a small open economy with a flexible labor market. We identify three potential effects of MNE activity associated with the transfer of foreign knowledge, diffusion of this knowledge among indigenous firms and the inflow of capital from abroad. We show that the impact of multinational enterprises on wages in the host country depends on differences in capital intensity between multinational and local sectors, the amount of capital transferred to the host country from abroad and the magnitude of knowledge spillovers stemming from multinational activity to indigenous firms.

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References

Batra R.N. (1986), A General Equilibrium Model of Multinational Corporations in Developing Economies, ?Oxford Economic Papers?, Vol. 38, No. 2.
Batra R.N., Ramachandran R. (1980), Multinational firms and the theory of international trade and investment, ?American Economic Review?, Vol. 70, No. 3.
Beladi H., Choi E.K. (1995), On the Emergence of Multinational Corporations in Developing Economies: A Note, ?Regional Science and Urban Economics?, Vol. 25, No. 5.
Caves R.E. (1971), International Corporations: The Industrial Economics of Foreign Investment, ?Economica?, Vol. 38, No. 149.
Cieślik A. (2008), Multinational Firms, International Knowledge Flows, and Dual Labor Markets in Developing Economies, ?Review of Development Economics?, Vol. 12, No. 1.
Lipsey R.E. (2004), Home- and Host-Country Effects of Foreign Direct Investment, [in:] R.E. Baldwin, A.L. Winters (eds.), Challenges to Globalization: Analyzing the Economics, The University of Chicago Press, Chicago.
Stern R.E. (1997), Foreign Direct Investment, Exports and the East-West Integration: Theory and Practice, [in:] R.N. Cooper, J. Gács (eds.), Trade Growth in Transition Economies: Export Impediments for Central and Eastern Europe, Edward Elgar, Cheltenham.

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Published

2012-03-31

How to Cite

Cieślik, A. (2012). Multinational Enterprises, Foreign Knowledge and Host Country. Equilibrium. Quarterly Journal of Economics and Economic Policy, 7(1), 7–20. https://doi.org/10.12775/EQUIL.2012.001

Issue

Section

Knowledge and innovation in global economy

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