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The effects of multinationals on host economies: A CGE approach

  • Latorre, María C.
  • Bajo-Rubio, Oscar
  • Gómez-Plana, Antonio G.

This paper offers a new perspective regarding the effects on a host economy of the entry of multinational enterprises (MNEs). We use a computable general equilibrium (CGE) approach, through a version of the Global Trade Analysis Project (GTAP) model extended to incorporate MNEs. The analysis is applied to the Czech Republic, a country that has received substantial inflows of foreign direct investment in the last few years. A special attention has been paid to the issue of profit repatriation. We find that the negative effects of profit repatriation are sizeable, and might even offset the positive impact of the entry of MNEs.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 26 (2009)
Issue (Month): 5 (September)
Pages: 851-864

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Handle: RePEc:eee:ecmode:v:26:y:2009:i:5:p:851-864
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. Wilhelm Schollmann, 2001. "Foreign Participation in Privatisation: What does it Mean? Empirical Evidence from the Czech Republic, Hungary and Poland," Post-Communist Economies, Taylor & Francis Journals, vol. 13(3), pages 373-388.
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  3. Lubomir Lizal & Jan Svejnar, 2001. "Investment, Credit Rationing and the Soft Budget Constraint: Evidence from Czech Panel Data," William Davidson Institute Working Papers Series 363, William Davidson Institute at the University of Michigan.
  4. Helpman, Elhanan, 2006. "Trade, FDI and the Organization of Firms," CEPR Discussion Papers 5589, C.E.P.R. Discussion Papers.
  5. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, June.
  6. Hertel, Thomas & David Hummels & Maros Ivanic & Roman Keeney, 2003. "How Confident Can We Be in CGE-Based Assessments of Free Trade Agreements?," GTAP Working Papers 1324, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  7. Neary, J Peter, 1978. "Short-Run Capital Specificity and the Pure Theory of International Trade," Economic Journal, Royal Economic Society, vol. 88(351), pages 488-510, September.
  8. Djankov, Simeon & Hoekman, Bernard, 1999. "Foreign investment and productivity growth in Czech enterprises," Policy Research Working Paper Series 2115, The World Bank.
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  11. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  12. Harrison, Glenn W. & Jones, Richard & Kimbell, Larry J. & Wigle, Randal, 1993. "How robust is applied general equilibrium analysis?," Journal of Policy Modeling, Elsevier, vol. 15(1), pages 99-115, February.
  13. George Verikios & Xiao-guang Zhang, 2001. "Global Gains from Liberalising Trade in Telecommunications and Financial Services," Others 0110005, EconWPA.
  14. Rutherford, Thomas F. & Tarr, David G., 2008. "Poverty effects of Russia's WTO accession: Modeling "real" households with endogenous productivity effects," Journal of International Economics, Elsevier, vol. 75(1), pages 131-150, May.
  15. Smarzynska, Beata K., 2002. "Does foreign direct investment increase the productivity of domestic firms : in search of spillovers through backward linkages," Policy Research Working Paper Series 2923, The World Bank.
  16. Mohamed Hedi Bchir & Yvan Decreux & Jean-Louis Guérin & Sébastien Jean, 2002. "MIRAGE, a Computable General Equilibrium Model for Trade Policy Analysis," Working Papers 2002-17, CEPII research center.
  17. Mussa, Michael, 1974. "Tariffs and the Distribution of Income: The Importance of Factor Specificity, Substitutability, and Intensity in the Short and Long Run," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1191-1203, Nov.-Dec..
  18. Damijan, Joze P. & Knell, Mark & Majcen, Boris & Rojec, Matija, 2003. "The role of FDI, R&D accumulation and trade in transferring technology to transition countries: evidence from firm panel data for eight transition countries," Economic Systems, Elsevier, vol. 27(2), pages 189-204, June.
  19. Jensen, Jesper & Rutherford, Thomas & Tarr, David, 2004. "The impact of liberalizing barriers to foreign direct investment in services - the case of Russian accession to the World Trade Organization," Policy Research Working Paper Series 3391, The World Bank.
  20. Oscar Bajo-Rubio & Antonio G. Gómez-Plana, 2004. "Reducing Social Contributions for Unskilled Labor as a Way of Fighting Unemployment: An Empirical Evaluation for the Case of Spain," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(2), pages 160-, August.
  21. Dunning, John H., 2000. "The eclectic paradigm as an envelope for economic and business theories of MNE activity," International Business Review, Elsevier, vol. 9(2), pages 163-190, April.
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  24. Holger Görg & David Greenaway, 2004. "Much Ado about Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," World Bank Research Observer, World Bank Group, vol. 19(2), pages 171-197.
  25. Robert E. Lipsey, 2002. "Home and Host Country Effects of FDI," NBER Working Papers 9293, National Bureau of Economic Research, Inc.
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  27. McKitrick, Ross R., 1998. "The econometric critique of computable general equilibrium modeling: the role of functional forms," Economic Modelling, Elsevier, vol. 15(4), pages 543-573, October.
  28. Philippa Dee & Kevin Hanslow & Tiem Phamduc, 2003. "Measuring the Cost of Barriers to Trade in Services," NBER Chapters, in: Trade in Services in the Asia Pacific Region, NBER East Asia Seminar on Economics (EASE), Volume 11, pages 11-46 National Bureau of Economic Research, Inc.
  29. Timothy J. Kehoe, 2003. "An evaluation of the performance of applied general equilibrium models of the impact of NAFTA," Staff Report 320, Federal Reserve Bank of Minneapolis.
  30. Morris Bornstein, 2001. "Post-privatisation Enterprise Restructuring," Post-Communist Economies, Taylor & Francis Journals, vol. 13(2), pages 189-203.
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