Technological Improvement and Industrial Employment

Abstract

This paper looks at how the entry of a multinational in the domestic market of an industry in a developing country affects the total industry wide employment. It is assumed that the technology of the multinational is more efficient than the domestic technology. Standard Cournot oligopoly and Bertrand models are used. When a multinational enters the market of a domestic monopoly employment increases only if technology differences are very small or very large. Entry into markets controlled by domestic oligopolies is associated with an increase in employment only if the difference in domestic and multinational technologies does not exceed a certain magnitude which is inversely related to the existing competition. The results can be generalised to any case in which the entrant into the industry is more efficient than the existing firms.