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Global Economy Journal

The Official Publication of the International Trade and Finance Association

Ed. by Sawyer, W. Charles

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Does the Presence of Multinational Corporations Affect a Country’s Gross Domestic Product?

1Department of Public Policy, University of Massachusetts – Dartmouth, North Dartmouth, MA, USA

Citation Information: Global Economy Journal. Volume 14, Issue 1, Pages 11–30, ISSN (Online) 1524-5861, ISSN (Print) 2194-5659, DOI: 10.1515/gej-2012-0001, February 2014

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This article investigates how using different measures of GDP can lead to conflicting development policies when it comes to industrial recruitment. The results suggest that often-employed policies of competing for inward FDI may not benefit GDP annual growth. A distinction is made between official exchange rate (OER) GDP and purchasing power parity (PPP) GDP. Both measures are employed as dependent variables in separate cross-sectional, time-series regression analyses of 60 nations. A measure of multinational corporation (MNC) concentration per nation is developed and included in the model to examine whether the investing nations benefit from the outward FDI of their firms. The data analysis shows that to be true particularly for developing nations that had top-ranked MNCs incorporated within their borders between 2005 and 2009. The findings challenge industrial recruitment policies and suggest that FDI outflows may be more contributive to GDP growth than FDI inflows. The findings also show conflicting results as to which factors contribute to GDP annual growth when both GDP measures are examined, thus raising questions about metrics fit and interpretations of previous studies.

Keywords: multinational corporations; FDI; GDP

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