Economics Unit 3- Inward Investment

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What are the advantages of Inward Investment?

·         Any investment into an economy will create jobs for local people

·         It is argued that there are better wages and working conditions in MNC’s compared to domestic firms. MNC’s have to maintain a reputation with their consumers in MEDC’s

·         More jobs and higher wages should lead to higher living standards and so less poverty (absolute and relative)

·         MNC’s will bring expertise into the host country and may well improve the knowledge and the skills of the people working there

·         MNC’s will also have the most up to date technology which can be transferred to other domestic businesses and improve their productivity.

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What are he disadvantages of Inward Investment?

·         The environment often suffers since MNC’s will locate where there are lower environmental standards in order to cut their costs.

·         Workers in MNC’s often have poor working conditions compared to MEDC’s.

·         The arrival of MNC’s can lead to domestic businesses being forced out of the market as they struggle to compete with large global businesses. This also leads to less domestic investment as domestic firms struggle to survive.

·         Many of the most skilled jobs are given to workers from the country of origin. This limits the potential gains to workers from improved skills.

·         The profits from MNC’s are repatriated to the country of origin.

·         MNC’s may use up resources unsustainably (so there are none left for future generations).

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