Learning and knowledge diffusion in a global economy

Kunal Dasgupta

Journal of International Economics, 2012, vol. 87, issue 2, 323-336

Abstract: I develop a dynamic general equilibrium model to understand how multinationals affect host countries through knowledge diffusion. Workers in the model learn from their managers and knowledge diffusion takes place through worker mobility. Unlike in a model without learning, I present a novel mechanism through which an integrated equilibrium represents a Pareto improvement for the host country. I go on to explore other dynamic consequences of integration. The entry of multinationals makes the lifetime earning profiles of host country workers steeper. At the same time, if agents learn fast enough, integration creates unequal opportunities, thereby widening inequality. The ex-workers of foreign multinationals also found new firms which are, on average, larger than the largest firms under autarky.

Keywords: Multinationals; Knowledge diffusion; Learning; Worker mobility; Pareto improvement; Spin-offs (search for similar items in EconPapers)
JEL-codes: F15 F23 F40 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (48)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:87:y:2012:i:2:p:323-336

DOI: 10.1016/j.jinteco.2011.11.012

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