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

Ariel Tomas Burstein and Alexander Monge-Naranjo

No 13073, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F23 F43 (search for similar items in EconPapers)
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Date: 2007-05
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