Archived — Research Summaries: Working Paper 2009-09: Role of FDI in the Canadian Economy

By Someshwar Rao, Malick Souare and Weimin Wang.

This paper reviews trends in foreign direct investment (FDI) and multinational production in Canada and Canada's direct investment abroad (CDIA), and provides an assessment of their impact on the Canadian economy. It pulls together a large body of existing literature in Canada and other countries on the pros and cons of FDI. The main conclusion of the paper is that both inward and outward FDI provide significant net long-term economic benefits to both home and host countries, provided they have competitive and dynamic product and factor markets as well as a good business climate. There is little evidence of hollowing-out in Canada in terms of movement out of Canada key corporate headquarter functions of MNEs operating in Canada.

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