Working Paper: NBER ID: w1101
Authors: James R. Markusen; Lars E.O. Svensson
Abstract: A general model of trade caused by international differences in production technology is developed using techniques of duality theory. For the caseof product-augmenting differences in technology, it is shown that there is a positive correlation between net export and technological superiority, such that a country will "on average" export goods for which the country has superior technolor. If some factors are permitted to be internationally traded, it is demonstrated via this correlation that the volume of trade must increase. Thus unlike trade caused by factor endowment differences, goods trade caused by product-augmenting differences in production technolody is always in this sense complementary with factor trade. For factor-augmenting technology differences, in the absence of factor trade the goods trade pattern is as if it was caused by factor endowment differences. With factor trade, goods trade and factor trade can then be either complements or substitutes.
Keywords: International Trade; Technology; Factor Mobility
JEL Codes: F10; F12; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Technological superiority (O33) | Net exports (F10) |
| Net exports (F10) | Volume of trade (F10) |
| Factor trade and goods trade (F10) | Volume of trade (F10) |
| Traded factors and non-traded factors (F16) | Goods trade and factor trade (F16) |