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Abstract:

cover
CEP Discussion Paper
Brain Drain or Brain Gain? Technology Diffusion and Learning On-the-job
Thomas Sampson
September 2012
Paper No' CEPDP1168:
Full Paper (pdf)

JEL Classification: F2; J24; O33


Tags: technology diffusion; managerial knowledge; learning on-the-job; fdi; brain drain

This paper develops a theory of technology transfer when technology is embodied in human capital and learning requires on-the-job communication between managers and workers. Patterns of knowledge diffusion depend on where high knowledge managers work and how much time they allocate to training workers. Managers appropriate the surplus training creates and in the open economy managers face a cross-country trade-off between labor costs and the value of knowledge transfer. Complementarity between country-wide efficiency and managerial knowledge makes learning more valuable in the North meaning that high knowledge managers choose to work in the North and globalization precipitates a brain drain of high knowledge Southern agents to the North. The brain drain reduces learning opportunities in the South and exacerbates cross-country knowledge differences.