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GTAP Resources: Resource Display

GTAP Resource #3258

"The Impact of Foreign-Owned Companies on Host Economies: A Computable General Equilibrium approach"
by Latorre, Maria


Abstract
The aim of the book is analysing the effects on a host economy of the entry of foreign-owned companies (i.e., multinational enterprises, MNEs). We offer a thorough and up-to-date review of the literature. In addition, we use an applied methodology, namely, computable general equilibrium (CGE) simulations, to provide quantitative outcomes and not just qualitative intuitions regarding how MNEs would affect economies.

The structure of the book is as follows. Chapter 1 offers an introduction where the central concepts are defined and the relevance of MNEs and FDI flows in the world economy are highlighted. Chapter 2 develops a comprehensive review of the theoretical and empirical literature on MNEs. The CGE model is explained in detail in Chapter 3. We have expanded a publicly available CGE model to include MNEs. This is the GTAP model (Hertel, 1997), which is highly relevant because it is designed to make use of a very rich database of the world economy (the GTAP database). We have introduced MNEs in the model in such a manner that OECD (2009) and Eurostat (2009) data on the activities of MNEs could be used, as the latter are absent in the GTAP database. The simulations of the impact of MNEs on host economies considering economy-wide effects are performed in Chapters 4 and 5. All along the study, and in addition to the aggregate results, we also focus on the differential impacts of MNEs across sectors, which may be of special interest for the policy- maker.

The conclusion seems of relevance. Profit repatriation matters. The mere entry of MNEs leads to small increases in GDP and welfare, which are likely to be offset when profit repatriation is above a certain threshold level. For the Czech Republic profit repatriation beyond 50 and 60 percent of the income generated by the entry of MNEs would result in a fall of GDP and welfare, respectively.


Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
Status: Published
By/In: In press, NOVA Science Publisher
Date: 2010
Version:
Created: Latorre, M. (4/13/2010)
Updated: Batta, G. (4/13/2010)
Visits: 1,284
- Foreign direct investment
- The GTAP Data Base and extensions


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