Is mobility of labour a channel for spillovers from multinationals to local domestic firms?

Abstract

This paper documents the extent of labour mobility from multinationals (MNEs) to non-MNEs in Norwegian manufacturing during the 1990s. On average, each year around one percent of workers in MNEs move to non-MNEs. By the year 2000, 45 percent of the non-MNEs employed workers with experience from MNEs. These workers earned a wage premium of more than 3 percent compared to their new colleagues in the non-MNEs. I estimate a Cobb-Douglas production function for non- MNEs and include the share of workers with recent MNE experience. Consistent with mobility being a channel for knowledge diffusion, I find that these workers contribute 20-25 percent more to productivity than workers without experience from MNEs. The difference between the private returns to mobility and the productivity effect at the plant level suggests that labour mobility from MNEs to non-MNEs represents a true knowledge externality.