International Trade
Technology's impact

The older literature assumed exogenous technologies and focused on their effects on the structure of foreign trade and on welfare. Recently more effort has aimed at explaining technological change. In Discussion Paper No. 1134, Research Fellows Gene Grossman and Elhanan Helpman describe the effects of foreign trade on technological change. They survey modelling efforts that have been motivated by a number of important concerns, some of which remain the same as in earlier work on trade and growth.

For example, many authors continue to be interested in the link between the nature of differences in countries' technological capabilities and the pattern of world trade. Recent research has asked how an across-the-board technological gap between rich and poor countries will be reflected in global trade structure, and how the invention of new goods in the industrialized North will affect the number and type of goods that are produced by the less developed South. Attention also still focuses on the age-old question of how technological developments in one country or region affect living standards abroad. Should a country be happy to see technological progress in its trade partners, or should it disparage the consequent `loss of competitiveness'? Is trade typically beneficial to all parties in a world of unequal (and changing) technological capabilities or might some be losers in the long-run? Apart from integrating much of the recent literature on learning by doing, the authors show that there are important common themes and results in these two strands of the literature.

Technology and Trade
Gene M Grossman and Elhanan Helpman

Discussion Paper No. 1134, February 1995 (IT)