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

Ariel T. Burstein and Alexander Monge-Naranjo

The Quarterly Journal of Economics, 2009, vol. 124, issue 1, 149-195

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.

Date: 2009
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Working Paper: Foreign Know-How, Firm Control, and the Income of Developing Countries (2007)
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