Do Multinational Enterprises Matter for Economic Development?

Abstract

The aim of the paper is to determine the effect of Multinational Enterprises on economic development, measured by the Human Development Index, in a group of 58 high and upper-middle income countries where they operated from 2005-2016, while considering the role of free trade agreements. We follow a robust dynamic panel data econometric methodology. For our analysis, we considered the total sample and sub-samples of countries based on their trade status. The results indicate that Multinational Enterprises drive economic development by favoring the expansion of people’s capabilities. Therefore, measured by added value, the economic activity of this type of company tends to enrich the life of society as well as the fundamental freedoms in the foreign country in which they operate. The effects of Multinational Enterprises on economic development are higher in countries with a large number of Free Trade Agreements, which means that intensification of free trade favors the MNE’s role in social goals.