The multinationals’ economic penetration, growth, industrial output, and domestic savings in developing countries: Another look

Abstract

This study evaluates the effects of the multinationals’ economic penetration on GDP growth rate, the industrial output growth, and domestic capital formation using, for econometric analyses, a more recent data set from LDCs. Likelihood ratio tests showed that (a) there was significant structural variation across the low‐income and the middle‐income countries, and (b) there had been a significant dynamic structural shift over time, that influenced the economic relationships. Statistical tests also showed that the hypothesis of exogeneity of the multinational variable could not be rejected. The study finds little or no empirical support for the multinational variable being significantly a deterrent factor on LDCs’ GDP growth rate, or on industrial output growth, or on domestic savings rate; whereas the effects of domestic variables, the national savings rate, exports and state's economic intervention policy emerge quite strongly.