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This article provides a comprehensive synthesis and evaluation of the existing literature on multinationals (MNEs) and foreign direct investment (FDI). It covers both theoretical and empirical studies. On the theoretical side, it offers a chronological description of the main strands since the earliest perfect competition studies from the 1960s till new recent contributions such as the Knowledge-capital model or those on internalisation issues. On the empirical side, it concentrates on the effects of MNEs and FDI on host economies, given their controversy. It reviews their impact on foreign trade, domestic firms’ productivity, market structure, wages and GDP growth. It also analyses a nascent and less known literature on empirical computable general equilibrium models that include the activities of MNEs.
