May improve the skills and technology in the whole country because they may bring more qualified human resources and more sophisticated technology when setting up in the host country to human resources are able to learn from the MNCs

Reduce poverty

more imports, lower (X-M), worsening current account balance for host country, lower AD, lower GDP

Government may earn higher tax revenue - Foreign firms entering the country will be taxed - Foreign firms may employ domestic workers, hence increasing employment, increase the level of income, higher income tax revenue and also an increase in the indirect tax revenues due to spending

The foreign firms may not pay corporate taxes to the domestic country because they may repatriate their profits back to their home country

MNCs avoid paying taxes because the host country may not have a well established legal system so the MNCs may underestimate their amounts of profits avoiding paying higher amount of taxes

It may drive the domestic firms out of the business (intense competitions) - Because MNCs usually produces large quantity and invest in technology, their production is more efficient, hence lower CoP, hence translate into lower P. - Domestic consumers prefer the MNCs products compared to their own locally produced products, domestic firms will have to lose their revenues, hence higher unemployment

Technologies and ideas spread

Firms are able to sell products abroad which increases their revenue as increases the profits and firms will have expansion into the larger market which makes them able to achieve EoS because the average cost of production will be lower in price of products will be more competitive

Firms are able to obtain cheaper import raw materials and able to invest in new technology from abroad, which increases the production, lower CoP

Friends were also be able to pay lower corporate tax - Able to relocate in the country with lower business taxes, which reduces CoP, higher profitability for firms

Consumers will be faced with more variety of products and also cheaper price of products

As employment increases, there will be a higher level of income, households are more able to purchase G/S or invest in merit goods. eg. healthcare services / human resources are becoming more skilled (improves the quality of human resources) which improves SoL

Lower wages, worse working condition

It may decide to set out in other countries to exploit the natural resources and it may lead to external cost to the host country because the production is increasing the demand for resources will rise MNCs use the resources in an unsustainable way they dump the toxic waste and create air pollution which harm the SoL of the population in terms of health consequences

More jobs in LDC, lower costs aroung the world, lower cost for MDC firms, higher supply, more jobs

Tariffs (a tax on imports) and quotas are protections that countries used to restrict the imports entering their country (see chapter 38 later).

Gradually countries have removed these in order to enjoy the benefits of free trade. If they remove the restrictions on imports entering their country, it makes it more likely that other countries will reduce their trade restrictions. This could mean that a country could sell more X to those other countries.

In order to avoid tariffs and quotas, foreign companies have set up factories in host countries. By doing this, they can sell their products directly in the host country without having to deal with tariffs and quotas.

Much less cost of transporting goods as transport networks (e.g. bigger aircraft, bigger ships, faster trains, smoother roads) have improved.

The development of technology has allowed more services to be delivered electronically (e.g. Netflix, financial services).

Workers have been able to move around more easily due to the low cost of flights.

Modern computing allows firms to transfer complex data instantly to any part of the world. It also means that more people can work at home, or any other location that they choose. Many people do not have to be based in an office to do their jobs. This makes it easier for firms to have operations all over the world.

The Internet also allows consumers to gather information and buy goods online from firms located in different parts of the world. ie. e-commerce

See chapter 36

Lower unemployment

Invest in infrastructure, It reduces cost an increase efficiency for all firms

- Provide training is in work experience for local workers, improving skills, higher quality human resources. The host government of LDC may also provide better education or training in order to attract MNCs - FDI spillovers may also encourage local people to set up businesses

Help to develop capital in the host country, eg. efficient factories, advanced technology, and environmentally safe production methods

More taxes to the host country gov, mostly by paying profit taxes. - may pay in direct taxes too (if purchasing domestic raw materials) - the employment will also increase the income tax is paid by workers to the government - These higher tax revenues enables government to provide more services, hence higher SoL

MNCs avoid paying taxes because the host country may not have a well established legal system or they find expensive lawyers to underestimate their amounts of profits avoiding paying higher amount of taxes

The foreign firms may not pay corporate taxes to the domestic country because they may repatriate their profits back to their home country

Contribute towards environmental damage particularly those in extraction industries, such as coal oil and gold mining

It may impose their culture on the host country, perhaps at the expense of the richness of the local culture, reduces cultural diversity around the world as they continue to expand, particularly to LDCs

Assets: they have huge assets (land, buildings, plant, machinery and money for example) and revenues.MNCs are extremely well-resourced and can often afford to take on large-scale contracts and projects.

Staff: they can afford to hire highly qualified and experienced staff, including executives and managers.

Technology: they can afford to keep up to date with technological developments so that they always have the most efficient factories and equipment, which can help to lower costs.

Advertising and marketing: they can invest huge amounts of money in these areas to outcompete smaller rivals.

Government influence: their great power can influence government decision making in the firm’s favour.

EoS: these can be exploited more easily, meaning more efficiency and lower average costs, which also means higher profits.