PUBLICATIONS & REPORTS

Contents Introduction

This paper first illustrates the fact that FDI stocks are generally a poor proxy for trends in real activities (e.g., sales and employment) of foreign MNCs in Asia’s developing economies. Second, it demonstrates how foreign MNC shares of host economy activities, and trends in shares of those activities, differ greatly depending on the activity being examined. For example, foreign MNCs usually account for large shares of production than of employment, reflecting the tendency for foreign MNCs to have relatively high labor productivity compared to local firms or plants. Similarly, foreign MNCs often tend to pay higher wages and the limited evidence available. However, there are notable exceptions to these patterns, and often substantial differences in trends of foreign MNC shares, or equivalently in trends of foreign MNC-local differentials, depending on the indicator, host economy, time period, and/or industry examined. Perhaps the most prevalent differentials in Asia’s developing economies are for foreign MNCs to export a relatively large proportion of their sales and to be relatively large compared to their local counterparts.