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Multinationals, Linkages, and Economic Development

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  • Rodriguez-Clare, Andres

Abstract

This paper explores how multinationals affect underdeveloped regions through the generation of linkages. It is shown that the linkage effect of multinationals on the host country is more likely to be favorable when the good that multinationals produce uses intermediate goods intensively, when there are large costs of communication between the headquarters and the production plant, and when the home and host countries are not too different in terms of the variety of intermediate goods produced. If these conditions are reversed, then multinationals could even hurt the developing economy, formalizing the idea that multinationals may create enclave economies within developing countries. Copyright 1996 by American Economic Association.

Suggested Citation

  • Rodriguez-Clare, Andres, 1996. "Multinationals, Linkages, and Economic Development," American Economic Review, American Economic Association, vol. 86(4), pages 852-873, September.
  • Handle: RePEc:aea:aecrev:v:86:y:1996:i:4:p:852-73
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    1. Henderson, Vernon, 1997. "Externalities and Industrial Development," Journal of Urban Economics, Elsevier, vol. 42(3), pages 449-470, November.
    2. Wayne B Gray & Ronald J Shadbegian, 1993. "Environmental Regulation And Manufacturing Productivity At The Plant Level," Working Papers 93-6, Center for Economic Studies, U.S. Census Bureau.
    3. Deily, Mary E. & Gray, Wayne B., 1991. "Enforcement of pollution regulations in a declining industry," Journal of Environmental Economics and Management, Elsevier, pages 260-274.
    4. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
    5. Scott E. Atkinson & T. H. Tietenberg, 1987. "Economic Implications of Emissions Trading Rules for Local and Regional Pollutants," Canadian Journal of Economics, Canadian Economics Association, vol. 20(2), pages 370-386, May.
    6. Roumasset, James A. & Smith, Kirk R., 1990. "Exposure trading: An approach to more efficient air pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 18(3), pages 276-291, May.
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