Trade in Goods and Factors with International Differences in Technology

A general model of trade caused by international differences in production technolor is developed using techniques of duality theory.For the case of product-augmenting differences in techno1or, 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 technolor is always in this sense complementary with factor trade.For factor-augmenting technolor 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.