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Discussion Paper Details

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Title: Foreign Direct Investment and Spillovers through Workers' Mobility

Author(s): Andrea Fosfuri, Massimo Motta and Thomas R�nde

Publication Date: August 1999

Keyword(s): Externalities, Labour Mobility, Multinational Corporations, Spillovers and Training

Programme Area(s): International Trade and Regional Economics

Abstract: We analyze a model where a multinational firm can use a superior technology in a foreign subsidiary only after training a local worker. Technological spillovers from foreign direct investment arise when this worker is later hired by a local firm. Pecuniary spillovers arise when the foreign affiliate pays the trained worker a higher wage to prevent her from moving to a local competitor. We study conditions under which these spillovers occur. We also show that the multinational firm might find it optimal to export instead of investing abroad to avoid dissipation of its intangible assets or the payment of a higher wage to the trained worker.

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Bibliographic Reference

Fosfuri, A, Motta, M and R�nde, T. 1999. 'Foreign Direct Investment and Spillovers through Workers' Mobility'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2194