Working Paper: NBER ID: w13073
Authors: Ariel Burstein; Alexander Mongenaranjo
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.
Keywords: Managerial Knowhow; Foreign Direct Investment; Productivity; Developing Countries
JEL Codes: F23; F43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Foreign managerial knowhow (M16) | Productivity in developing countries (O49) |
| Eliminating barriers to foreign control of domestic production factors (F23) | Output in developing countries (O10) |
| Foreign managerial knowhow (M16) | Consumption in developing countries (O10) |
| Foreign management reallocates firm-embedded productivity (D29) | Local productivity (O49) |
| Presence of foreign firms (F23) | Output gap between developed and developing countries (F63) |