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Why trade when you can transfer the technology: Revisiting Smith and Ricardo

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  • Rajat Acharyya
  • Sugata Marjit

Abstract

This paper explores the possibility of international technology transfer in lieu of trade in a model with absolute and comparative advantage. Countries having absolute advantage in producing a good may offer that technology to a potential trading partner against a fee and both the countries might gain depending on the extent of comparative and absolute advantages. Thus, gains from trade might be dominated by gains from technology transfer, and we provide a formal proof and conditions for this possibility. Such an avenue of fruitful exchange remains unexplored in the Ricardian model of trade. Our result extends to the many commodity case.

Suggested Citation

  • Rajat Acharyya & Sugata Marjit, 2023. "Why trade when you can transfer the technology: Revisiting Smith and Ricardo," Review of International Economics, Wiley Blackwell, vol. 31(4), pages 1508-1527, September.
    • Handle: RePEc:bla:reviec:v:31:y:2023:i:4:p:1508-1527
    DOI: 10.1111/roie.12674
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    References listed on IDEAS

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    1. Glass, Amy Jocelyn & Saggi, Kamal, 1998. "International technology transfer and the technology gap," Journal of Development Economics, Elsevier, vol. 55(2), pages 369-398, April.
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    JEL classification:

    • F10 - International Economics - - Trade - - - General

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