Essays on Foreign Direct Investment and Economic Growth in Host Countries Report

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The paper "Foreign Direct Investment and Economic Growth in Host Countries" is a great example of a report on macro and microeconomics. Multinationals are responsible for foreign direct investment for major economic powerhouses globally. Corporations such as Coca Cola, Nike, Mobil, Toyota, Wal-Mart etc have an international presence spreading from the developed to the developing/underdeveloped world. Given that majority of the homes countries are developed, competition is usually high thus forcing these companies to explore foreign markets which more often than not are unexplored. Home governments have been known to offer subsidies and information to their corporations to explore other markets (Kehl 2009).

The department of foreign trade and the foreign affairs offers up-to-date information to their corporations seeking to explore foreign markets. The United Nations Conference on Trade and Development (UNCTAD) publishes annual reports on national FDI changes. Between 1991 and 2002, UNCTAD noted that there were over 1,500 favorable changes on policies by various countries to encourage inward FDI as compared to only 100 that were deemed unfavorable (Lipsey & Sjoholm 2007). Therefore, the majority of the countries are keen on encouraging inward FDI.

So what are the benefits of inward FDI? The UN states that FDI from the developed to the developing and underdeveloped countries is one of the sure ways of reducing poverty in such countries while Moran, Graham, and Blomstrom (2005) claim that FDI to the third world countries is more effective than financial and economic aid in alleviating poverty in such countries. As of 2000, the top fifty largest multinationals held $1.8 trillion in foreign capital and $2.1 trillion in sales (Kehl 2009). These multinationals afford economic benefits to the host countries through the provision of employment, capital, revenue, trade, and technology transfer. Employment As new entrants in the market, multinationals offer employment opportunities to the host countries.

However, given that most multinationals employ superior technology, expatriates have to be brought in. As such, the locals do not get to enjoy the senior positions but tend to occupy the low-level positions. Nonetheless, foreign-owned corporations have a tendency to offer higher wages than other employers in the host country (OECD 2010; Lipsey & Sjoholm 2007). Multinationals may furthermore offer above-market wages in order to cut down employee turnover and prevent competitive advantage in technology spilling over to competitors.  

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