Multinationals and the training of workers in developing countries

Working Paper ; 200427 Diffusion du document : publiqueThe authors analyze the “direct investment v. export” decision of a multinational firm in competition with a potential entrant in a host country. They consider a workers’ skills asymmetry between the host and the multinational home countries. The possibility to train the hired workers when investing is given to the multinational. The authors illustrate that an improvement in the workers’ skills in the host country does not increase systematically the multinational incentive to invest. Also, they demonstrate that under the multinational’s training assumption, the tariff-jumping investment can always be welfare improving even if it excludes the local firm from the market