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.

Notes

Professor of Economics, Illinois State University, Normal, Illinois 61761, USA. The author wishes to thank Professor Mathew Morey for his valuable assistance in conducting the econometric analysis. Professor Russel Rutter (English Department, technical writing) for his comments on the write‐up of the manuscript, and Andy Li and Marty Dwyer for their job of data processing and computer programming. The author is also grateful to the anonymous referee and the editor for their very thoughtful and constructive comments and suggestions which helped in revising the manuscript. However, for any error, the author alone is responsible.