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

Author

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  • Ariel T. Burstein
  • Alexander Monge-Naranjo

Abstract

Management know-how shapes the productivity of firms and can be reallocated across countries as managers acquire control of factors of production abroad. We construct a quantitative model to investigate the aggregate consequences of the international reallocation of management know-how. Using aggregate data, we infer the relative scarcity of this form of know-how in a sample of developing countries. We find that developing countries gain, on average, 12% in output and 5% in welfare (with wide variation across countries) when they eliminate policy barriers to foreign control of domestic factors of production.

Suggested Citation

  • Ariel T. Burstein & Alexander Monge-Naranjo, 2009. "Foreign Know-How, Firm Control, and the Income of Developing Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 124(1), pages 149-195.
  • Handle: RePEc:oup:qjecon:v:124:y:2009:i:1:p:149-195.
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    File URL: http://hdl.handle.net/10.1162/qjec.2009.124.1.149
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    More about this item

    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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