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

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Author Info
Ariel Burstein
Alexander Monge-Naranjo

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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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Handle: RePEc:nbr:nberwo:13073

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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  1. Ellen R. McGrattan & Edward C. Prescott, 2008. "Openness, technology capital, and development," Staff Report 396, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  2. Diego Restuccia & Richard Rogerson, 2008. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 707-720, October. [Downloadable!] (restricted)
    Other versions:
  3. Diego Restuccia, 2008. "The Latin American Development Problem," Working Papers tecipa-318, University of Toronto, Department of Economics. [Downloadable!]
  4. Jan Eeckhout & Boyan Jovanovic, 2007. "Occupational Choice and Development," NBER Working Papers 13686, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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