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Do foreign MNEs alleviate multidimensional poverty in develo** countries?

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Abstract

This study investigates the effects of the investment-based presence of multinational enterprises (MNEs) on poverty in develo** countries. The relationship is decomposed into different pathways corresponding to various facets of firms’ presence and activities, and monetary and multidimensional poverty. We hypothesize that depending on the pathways, the effects can be positive or negative in terms of poverty alleviation, and an overall conclusion has to be nuanced. The hypotheses are tested across 431 Indonesian administrative districts, observed in 2008, 2014 and 2018. Pooled instrumental variable regressions show that a higher presence of foreign MNEs does not reduce the number of people below the poverty line. It raises the depth and severity of poverty, and the population is also more exposed to pollutions. These results inform the ongoing debate, and offer important implications for policy makers eager to attract foreign direct investments, as well as for MNEs’ managers concerned with social responsibility and achieving sustainable development goals in host develo** countries.

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Notes

  1. We thank a referee for pointing out that these effects are mainly mediated.

  2. For instance, when British American Tobacco started the manufacturing and sale of incense sticks in India, this destroyed the jobs of many Indian women. They were homeworking, making these incense sticks by hand, and had this occupation as their main source of livelihood (Jenkins, 2005).

  3. Below the 33 Indonesian provinces, the second-level administrative subdivision is composed of rural districts (kabupaten) and municipalities (kota). Administrative districts have their own local government, and are central in the provision of governmental services.

  4. The Indonesian Monitoring Committee for the Implementation of Regional Autonomy (KPPOD) builds periodically local (district, province) business and investment climate indexes, to monitor the consequences of decentralization. To do so, KPPOD interviews representative samples of private firms with 10 employees or more, in the non-primary sectors. The surveys are complemented with secondary data such as the frequency of land eviction in a district, or the average length to obtain a registered land certificate. Data are retrieved from local economic governance reports for various years, available at: https://www.kppod.org/penelitian/index (accessed 19 March 2022).

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Acknowledgements

I am grateful to the associate editor (Mariacristina Piva) and two anonymous reviewers for many helpful comments and suggestions. I also thank participants to seminar at KEDGE Business School, and 39th EBES conference (Rome, 6 April 2022).

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    Julien Hanoteau

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Hanoteau, J. Do foreign MNEs alleviate multidimensional poverty in develo** countries?. Eurasian Bus Rev 13, 719–749 (2023). https://doi.org/10.1007/s40821-023-00246-3

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