Multinational Firms, Technology Transfer, and Welfare

Ohio State University, Working Paper No. 97-04

33 Pages Posted: 26 Dec 1998

See all articles by Amy Jocelyn Glass

Amy Jocelyn Glass

Texas A&M University - Department of Economics

Kamal Saggi

Southern Methodist University (SMU) - Department of Economics

Date Written: December 8, 1998

Abstract

We construct an oligopoly model in which a multinational firm has a superior technology compared to local firms in the host country. Workers employed by the multinational acquire knowledge of its superior technology and can spread their knowledge to host firms by switching employers. The multinational chooses to pay a wage premium to prevent host firms from hiring away its workers if host firms are sufficiently disadvantaged and/or there are sufficiently many host firms. Diffusion of the superior technology benefits host firms at the expense of workers, whose wages suffer. The host government can have an incentive to attract FDI, even when technology transfer will not result, due to the wage premium earned by employees of the multinational firm. Also, FDI with technology transfer may reduce host welfare.

JEL Classification: F23, F43, F13, O14, O33, O38

Suggested Citation

Glass, Amy Jocelyn and Saggi, Kamal, Multinational Firms, Technology Transfer, and Welfare (December 8, 1998). Ohio State University, Working Paper No. 97-04, Available at SSRN: https://ssrn.com/abstract=142302 or http://dx.doi.org/10.2139/ssrn.142302

Amy Jocelyn Glass (Contact Author)

Texas A&M University - Department of Economics ( email )

5201 University Blvd.
College Station, TX 77843-4228
United States
979-845-8507 (Phone)
979-847-8757 (Fax)

Kamal Saggi

Southern Methodist University (SMU) - Department of Economics ( email )

Dallas, TX 75275
United States
214-768-3274 (Phone)
214-768-1821 (Fax)

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