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Foreign Know-How, Firm Control, and the Income of Developing Countries

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  • Ariel Burstein
  • Alexander Monge-Naranjo

Abstract

Managerial know-how shapes the productivity of firms by defining the set of available technologies, production choices, and market opportunities. This know-how can be reallocated across countries as managers acquire control of factors of production abroad. In this paper, we construct a quantitative model of cross-country income differences to study the aggregate consequences of international mobility of managerial know-how. We use the model and aggregate data to infer the relative scarcity of this form of know-how for a sample of developing countries. We also conduct policy counterfactuals and find that on average, developing countries gain up to 23% in output and 9% in consumption when they eliminate all barriers to foreign control of domestic factors of production.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13073.

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Date of creation: May 2007
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Publication status: published as Ariel T. Burstein & Alexander Monge-Naranjo, 2009. "Foreign Know-How, Firm Control, and the Income of Developing Countries-super-," The Quarterly Journal of Economics, MIT Press, vol. 124(1), pages 149-195, February.
Handle: RePEc:nbr:nberwo:13073

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