Abstract

This paper examines the effects of trade policies on the adoption of new technologies. A two-sector model with international-trade is developed where technological progress is neutral. A group of interest (suppliers of skilled labor), acting in coalition, decide which technology will be available for firms. The key findings are the following. With free trade, or a tariff, the best technology is always used; Under a quota, generally the best technology is not used. In other words, with respect to adoption of new technologies we have equivalence between free trade and tariffs. A quota generates resistance to new technologies while with free trade or tariffs this resistance is eliminated.

Highlights

  • There is evidence that total factor productivity (TFP ) differs across countries.1 It has been argued that part of this difference is due to the resistance to the adoption of new technologies

  • Our results indicated that with respect to adoption of new technologies the equivalence is between free trade and tariffs since both eliminate resistance

  • In our model, there is no equivalence between a tariff and a quota

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Summary

INTRODUCTION

There is evidence that total factor productivity (TFP ) differs across countries. It has been argued that part of this difference is due to the resistance to the adoption of new technologies. Our results indicated that with respect to adoption of new technologies the equivalence is between free trade and tariffs since both eliminate resistance.. Mello and Corbo [20] studying Chile and Kim [10] sudying Korea found a strong correlation between short run growth in productivity and trade liberalization Even though they generally do not differentiate impacts of quota and tariffs, Muendler [14] tested the difference for the Brazilian case. We can say that our economy with free trade or tariff is equivalent to Parente and Prescott [16,17]economy without monopoly rights In their model, if no group has the power to block new technologies (as they say, there are no monopoly rights), the firms will always use the most productive technology.

THE MODEL ECONOMY
Tariffs
Findings
CONCLUSIONS
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