Mehrene Larudee

Mehrene@ukans.edu

phone:785-864-2859

fax: 785-864-5270

Technology transfer to a developing country is modeled as training of skilled workers in a multinational subsidiary there, followed by their movement to a host firm, in a Cournot duopoly two-period game. A more productive vintage of technology appears in each period, and the multinational may or may not adopt it and provide costly training to its workers. In the period after training, technology transfer happens if the host firm offers a higher wage to trained workers than the multinational.

For a plausible cost-of-training function, technology transfer with upgrading and training is found to occur when (1) the productivity gain from upgrading to a new vintage is high, or (2) when skill is highly transferable from one vintage to the next, or both. Previous findings are also confirmed that technology transfer occurs when (3) the productivity of untrained workers is much lower than that of trained workers. A wide variety of outcomes occurs for different parameter values, making the model a potentially useful tool for analyzing the variety of outcomes observed empirically in developing countries.