A comment on the multifaceted relationship between multinational enterprises and within-country inequality

Rajneesh Narula & Khadija van der Straaten


The capacity of Multinational Enterprises (MNEs) to upgrade economic activity in the host country is a key objective of an MNE-assisted development agenda, arguably having contributed to reducing income inequalities between countries. However, the limited evidence available suggests the gains of FDI are rarely evenly distributed within recipient countries. How do MNEs affect the extant within-country inequalities? Whether by direct or indirect action (or by inaction), MNEs can have both a positive and a negative effect on within-country social and economic inequality. We broaden our engagement with inequality beyond income levels, as this is just one aspect of inequality that shapes or impedes human development. We believe it is necessary - for both MNEs and policymakers - to have a more nuanced understanding of how, and under what circumstances, the presence of MNEs affects inequality in host economies. We therefore highlight some key issues and avenues for future research.

JEL Classification: D63, F23, F63, O17, J31

Keywords: inequality, gender, FDI, employment, linkages, informality, spillovers

Download the working paper