Working Paper: CEPR ID: DP6118
Authors: James R. Markusen; Natalia Trofimenko
Abstract: Gains from productivity and knowledge transmission arising from the presence of foreign firms have received a good deal of empirical attention, but theoretical micro-foundations for this mechanism are limited. Here we develop a dynamic model in which foreign experts may train domestic 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 were self-learnt at home, (b) producing domestic skilled workers earlier in time than if the domestic economy had to rediscover the relevant knowledge through 'reinventing the wheel.' We use fixed effects and nearest neighbour matching estimators on a panel of plant-level data for Colombia that identifies the use of foreign experts, to show that these experts have substantial, although not always immediate, positive effects on the wages of domestic workers and on the value added per worker.
Keywords: foreign experts; knowledge transfer; spillovers
JEL Codes: F10; F23; O24; O33; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Hiring foreign experts (F22) | Wages of skilled workers (J31) |
| Hiring foreign experts (F22) | Wages of unskilled workers (F66) |
| Hiring foreign experts (F22) | Value added per worker (J39) |
| Hiring foreign experts (F22) | Productivity (O49) |
| Employment of foreign experts (F22) | Domestic productivity (O49) |
| Employment of foreign experts (F22) | Wage profiles (J31) |
| Hiring foreign experts (F22) | Effect on wages during employment (J31) |
| Postponing hiring foreign experts (J68) | Contribution to wage increases (J31) |
| Presence of foreign experts (F35) | Impact on productivity (O49) |