Suchergebnisse

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 the domestic economy 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 labor 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 labor working with the experts become skilled in the second period. We analyze 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.

The observation of an increase in the ratio of skilled to unskilled wages in the high-income countries and in some cases in low/middle income countries has led to considerable discussion and indeed controversy as to its cause. Virtually none of the analysis has considered a possible role of multinational investment in explaining the wage gap phenomenon, despite the fact that direct investment surged during the late 1970's and 1980's, the same time in which the wage gap began to rise sharply in the US after years of decline. This paper adapts our earlier work to consider what role multinationals might play in factor markets. For a skilled-labor abundant country, we find that the wage gap may rise as countries become more similar in size and in relative endowments, and as investment is liberalized. However, falling trade costs may have the opposite effect on the wage gap, and the effect of grow in the world economy depends upon a number of initial conditions. Corresponding results are derived for initially unskilled-labor abundant countries.