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The Effects Of Multinational Enterprises Investment In The Nontraded Sector Of Developing Economies

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  • Abera Gelan

    (University of Wisconsin-Milwaukee)

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.

Suggested Citation

  • Abera Gelan, 2004. "The Effects Of Multinational Enterprises Investment In The Nontraded Sector Of Developing Economies," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 29(2), pages 41-64, December.
    • Handle: RePEc:jed:journl:v:29:y:2004:i:2:p:41-64
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    More about this item

    Keywords

    Foreign Direct Investment; Knowledge-based Assets; Multinational Enterprises; Nontraded Good;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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