International transactions in innovative machinery∗

Abstract

The paper explores the economic implications of two different types of transactions to bring new technology into Third World industries — ’machine‐maker’ and ‘machine‐user’ transfers. Its main conclusion is agnostic. It suggests that there is no presumption in favour of ‘arms length’ transaction as opposed to the more complex transfers of the machine‐user type—not at least in terms of comparative static analysis. The comparative merits of the two types of transfer depend in the end on their international distributional effect and the relative case with which these can be controlled by government policy.