Foreign Multinational Production in Canadian Manufacturing Sector
Foreign multinationals play an important role in Canadian economy. Their affiliates accounted for about 50 percent of manufacturing production and 30 percent of total business production in Canada. Understanding the linkage between foreign multinational production in Canada and Canadian characteristics, such as scale of economy, human capital endowment, business environment, and trade barriers, can provide useful insights for policy development. Based on the framework developed in Markusen and Maskus¡¯ work, this paper examines the determinants of foreign affiliates¡¯ production in Canadian manufacturing sector using a panel dataset of 12 parent countries during the period between 1988 and 2005. The paper finds that foreign affiliates¡¯ production fits well a knowledge-capital model with production being more of vertical integrated. The result suggests that it mainly is Canada¡¯s relative low skill abundance and low labour cost of unskilled workers that attract foreign MNEs.
Volume (Year): 6 (2014)
Issue (Month): 1 (March)
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