Session 15. Multinationals and Migration: International Factor Movements. Foreign Direct Investment (FDI). Foreign Direct Investment.
Multinationals and Migration: International Factor Movements
Foreign Direct Investment
Foreign Direct Investment (FDI) is the flow of funding provided byan investor or lender (usually a firm) to establish or acquire a foreigncompany or to expand or finance an existing foreign company thatthe investor owns and controls.
International Portfolio Investment
International portfolio investment is used for all foreign investmentsthat do not involve management control.
Flows of FDI measure new equity investments and loads with MNEs during a period of times.
Stocks of FDI measure the total amount of direct investments that exist at a point in time.
Two types of taxation
1) The host country-country governments tax the profit of the local affiliates of the multinational.
For MNEs, This is less likely to be avoided.
2) The home country government taxes the parent company’s “local” profits earned on its own activities.
This happens in some countries; but such home country governments only collects few taxes on the profits of foreign affiliates
MNEs locate based on absolute advantages of each country.
To achieve “economies of scale”
1) One country
2) Many countries
To reduce “risk”
Should the Host Country Restrict FDI Inflows ?
International migration is the movement of people from one country (the sending country) to another country (the receiving country) in which they plan to reside for some noticeable of time.
Sn + Smig
Native Worker Lose
Workers Remaining Gain