Teaching Locals New Tricks: Foreign Experts as a Channel of Knowledge Transfers

41 Pages Posted: 31 Jan 2007 Last revised: 4 Sep 2010

See all articles by James R. Markusen

James R. Markusen

University of Colorado at Boulder - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Natalia Trofimenko

Kiel Institute for World Economics

Date Written: January 2007

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.

Suggested Citation

Markusen, James R. and Trofimenko, Natalia, Teaching Locals New Tricks: Foreign Experts as a Channel of Knowledge Transfers (January 2007). NBER Working Paper No. w12872. Available at SSRN: https://ssrn.com/abstract=960447

James R. Markusen (Contact Author)

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-492-0748 (Phone)
303-492-8960 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Natalia Trofimenko

Kiel Institute for World Economics ( email )

P.O. Box 4309
Kiel, D-24100
Germany

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