Gains from productivity and knowledge transmission arising from the presence of foreign firms has received a good deal of empirical attention, but micro-foundations for this mechanism are weak. Here we focus on production by foreign experts who may train domestic unskilled workers who work with them. Gains from training can in turn be decomposed into two types: (a) obtaining knowledge and skills at a lower cost than if they are self-taught at home; (b) producing domestic skilled workers earlier in time than if they had to rediscover the relevant knowledge through ‘reinventing the wheel’. We develop a three-period model in which the economy initially has no skilled workers. Workers can withdraw from the labour force for two periods of self study and then produce as skilled workers in the third period. Alternatively, foreign experts can be hired in period 1 and domestic unskilled labour working with the experts become skilled in the second period. We analyse how production, training, and welfare depend on two important parameters: the cost of foreign experts and the learning (or ‘absorptive’) capacity of the domestic economy.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
4504.
Find related papers by JEL classification: F20 - International Economics - - International Factor Movements and International Business - - - General F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Bronwyn H. Hall & Beethika Khan, 2003.
"Adoption of New Technology,"
NBER Working Papers
9730, National Bureau of Economic Research, Inc.
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