Foreign direct investment and spillovers through workers' mobility

Abstract

We analyze a model where a multinational fir 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 affiliat 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 fir might fin 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.