The role of multinationals in economic development: The benefits of FDI

Abstract

During her five years at the World Bank, Harrison initiated four studies involving multinational enterprises in four developing countries: Ivory Coast, Mexico, Morocco and Venezuela. These studies measure the role of multinational enterprises in promoting technology transfer; test whether multinationals push up wages for local workers; and analyze the validity of the “pollution haven hypothesis,” which states that foreign investors flock to developing countries to take advantage of lax environmental standards. Harrison finds no evidence of pollution havens and shows that multinationals raise wages for local workers. However, she finds that technology transfer has generally been limited to the joint ventures who receive foreign equity participation.