Khaled Elmawazini, Ph.D., Economics and Business, Albright College, Thirteenth & Bern Streets, P.O. Box 15234,, Reading, PA 19612
Multinational Enterprises, Human Development, and Host Country Labor Productivity
Khaled Elmawazini[1], Department of Economics and Business, Albright College - USA
Abstract
Although the impact of MNEs on host countries productivity and economic growth is extensively discussed theoretically and empirically in the relevant literature, some issues are still ambiguous and need more research. First issue is there is no agreement among researchers on the measure of host country absorptive capacity. The second issue is there is no agreement among researchers on the measure of spillovers from MNEs. These two issues may explain why the literature and empirical studies show mixed support for the hypothesis that MNEs have positive and significant spillovers on host country productivity and economic growth.
This paper contributes to the empirical literature by investigating human development level as a measure of host country absorptive capacity. The dataset of this study contains data for 39 countries in six developed and developing regions covering the period 1966-2000. The study uses cross-region comparison for the following reasons: (1) the foreign direct investment and technology production are regionally concentrated (UNCTAD, 1999). (2) Previous studies investigate the impact of MNEs technology diffusion on the productivity using cross-country or cross-industry comparisons. This study investigates this significance using cross-region comparison. So, it considers further empirical evidence on the effect of MNEs technology spillovers on the productivity. (3) Regional classification (T>N) allows us to use efficient estimations (i.e., Seemingly Unrelated Regressions). The panel data regressions show that human development level is more significant than human capital level in measuring host country absorptive capacity; the latter is extensively used in previous studies. This result may explain why the technology diffusion from MNEs is insignificant in many developing countries.
Keywords: Multinational Enterprises, Technology Diffusion, Human Development, and Panel Data Analysis.JEL: F23, O15, O33, O57, R11