Bridging the technology gap with limited human capital resources

We study whether restrictions concerning the mode of implantation of multinational firms (MNCs) are desirable for a developing country in terms of its technology acquisition strategy. More precisely, we aim at determining under which conditions domestic equity ownership constraints imposed on MNCs turn out to be beneficial for a country aiming at narrowing its technology gap with the world frontier while facing a limited supply of skilled labor resources. We base ourselves on an extension of the “variety model” of technology-driven growth, and are able to demonstrate that the desirable regulation depends non-monotonically on the overall available amount of skilled human capital. We further find that a positive shock on the pace of technological progress at the world frontier increases the scope of conditions under which ownership constraints become desirable.