Short Thesis: Cornell-Sorbonne; North South Models, Endogenisation of Qualified Labor Migration

Raphael, Rubin

Short Thesis: Cornell-Sorbonne; North South Models, Endogenisation of Qualified Labor Migration

Abstract

Let us follow Romer?s framework (1990) for the intermediate goods sector. We assume the following. A North operated multinational firm is implanted in the North and the South. The North designs and makes the higher quality products. In the South, its manufacturing divisions produce intermediate and final goods of lower quality competing against the South locals. The multinational is constrained by the South government to transfer a certain amount of knowhow Hns and technology xns. It also benefits from the large pool of cheaper labor, and leads the efforts of innovation in the South. Final goods and intermediate goods are tradable, although some restrictions may apply on the part which is technologically advanced. The countries, independently of the multinational and of its South competitor, still produce non tradable goods, to which quality rankings do not apply, because they depend on local taste. The workers in the North and the South thereby benefit from both types of goods, tradable and non tradable. Competitors in the South reverse-engineer the goods produced in the South and compete with the North on the final goods market which may be tariff protected, selling back to the North operated multinational firm, or on the intermediate goods market in the South. To the difference of Currie et al (1999, 1996), but similarly to our first model?s assumption that the rate of absorption of the North?s human capital is endogenous to the importance of foreign capital investment, the present model inspired by Ahmid Datta?s model illustrates the mechanism of endogenous absorption through reverse-engineering of foreign designed goods. Conclusions of the original Ahmid Datta?s 2005 model were that a threshold of accumulated human capital knowledge must exists, before the local human capital and imported technology become substitutes from being complements. We clearly reach to the same conclusion here. This finding is consistent with the role given to human capital by Keller 1996. We here strive to demonstrate our first model hypothesis by analyzing: ? The effect of the multinational?s decision of foreign investment on the threshold (imitation to innovation state). 6 ? The effect of international migration of qualified workers on the threshold. ? The effect of Northern consumer?s bias for local made products, on the threshold. ? How does the constraint imposed on the multinational to transfer technology and know-how, translate on its profits, on its market share in the South?

Date Issued

2007-08-25T15:38:33Z

Keywords

North South Models Grossman Helpman Migration innovation