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Trade in Goods and Factors with International Differences in Technology


  • Markusen, James R
  • Svensson, Lars E O


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.
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Suggested Citation

  • Markusen, James R & Svensson, Lars E O, 1985. "Trade in Goods and Factors with International Differences in Technology," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(1), pages 175-192, February.
  • Handle: RePEc:ier:iecrev:v:26:y:1985:i:1:p:175-92

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    References listed on IDEAS

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    Cited by:

    1. Goo, Youngwan & Park, Hyun, 2007. "Economic growth and convergence with international differences in technology," Journal of Macroeconomics, Elsevier, vol. 29(1), pages 145-168, March.
    2. Akerman, Anders & Larsson, Anna & Naghavi, Alireza, 2011. "Autocracies and Development in a Global Economy: A Tale of Two Elites," Research Papers in Economics 2011:24, Stockholm University, Department of Economics.
    3. Schiff, Maurice, 2006. "Substitution in Markusen's classic trade and factor movement complementarity models," Policy Research Working Paper Series 3974, The World Bank.
    4. James R. Markusen & Keith E. Maskus, 2001. "Multinational Firms: Reconciling Theory and Evidence," NBER Chapters,in: Topics in Empirical International Economics: A Festschrift in Honor of Robert E. Lipsey, pages 71-98 National Bureau of Economic Research, Inc.
    5. Linda S. Goldberg & Michael W. Klein, 1999. "International Trade and Factor Mobility: An Empirical Investigation," NBER Working Papers 7196, National Bureau of Economic Research, Inc.
    6. Svensson, Lars E O, 1988. "Trade in Risky Assets," American Economic Review, American Economic Association, vol. 78(3), pages 375-394, June.
    7. Leonard Cheng, 1984. "International trade and technology: A brief survey of the recent literature," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 120(1), pages 165-189, March.
    8. Jiandong Ju & Shang-Jin Wei, 2007. "Current Account Adjustment: Some New Theory and Evidence," NBER Working Papers 13388, National Bureau of Economic Research, Inc.
    9. Bhattarai, Keshab & Mallick, Sushanta, 2013. "Impact of China's currency valuation and labour cost on the US in a trade and exchange rate model," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 40-59.
    10. Richard B. Freeman, 2006. "People Flows in Globalization," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 145-170, Spring.
    11. Falvey, Rod, 1999. "Trade liberalization and factor price convergence," Journal of International Economics, Elsevier, vol. 49(1), pages 195-210, October.
    12. Rasciute, Simona & Pentecost, Eric J., 2010. "A Nested logit approach to modelling the location of foreign direct investment in the Central and Eastern European Countries," Economic Modelling, Elsevier, vol. 27(1), pages 32-39, January.
    13. Rod Falvey & Udo Kreickemeier, 2017. "Globalization and Factor Returns in Competitive Markets," World Scientific Book Chapters,in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 1, pages 3-25 World Scientific Publishing Co. Pte. Ltd..
    14. John Cockburn & Erwin Corong & Bernard Decaluwé & Ismaël Fofana & Véronique Robichaud, 2010. "The Gender and Poverty Impacts of Trade Liberalization in Senegal," Cahiers de recherche 1013, CIRPEE.
    15. Nijkamp, P. & Poot, J., 1990. "Endogenous technological progress and spatial interdependence," Serie Research Memoranda 0061, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    16. Roger White, 2010. "Migration and International Trade," Books, Edward Elgar Publishing, number 13670.
    17. Carol L. Osler, 1987. "Factor Prices and Welfare Under Integrated Capital Markets," NBER Working Papers 2447, National Bureau of Economic Research, Inc.
    18. Springer, Katrin, 2000. "Do We Have to Consider International Capital Mobility in Trade Models?," Kiel Working Papers 964, Kiel Institute for the World Economy (IfW).
    19. Simona Rasciute & Eric J. Pentecost & Helena I. Marques, 2007. "An Empirical Investigation of the Determinants of the Location of Foreign Direct Investment in the Central and Eastern European Countries Using Multilevel Data," Discussion Paper Series 2007_22, Department of Economics, Loughborough University, revised Sep 2007.

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