Technology advantage, terms of trade, and pattern of trade

Cheng‐Te Lee and Shang‐Fen Wu

International Journal of Economic Theory, 2023, vol. 19, issue 1, 166-174

Abstract: We develop a two‐country, two‐sector model of trade, and assume that the differences between two countries are not only the diversities of human capital distributions but also relative production technologies. We find that, in addition to the diversity effect, both the terms of trade effect and the relative technology effect can also matter for the pattern of trade. We prove that, unlike previous results, if combination of the terms of trade effect and the relative technology effect dominates the diversity effect, then a country with more diverse human capital will export goods produced by supermodular technology.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ijethy:v:19:y:2023:i:1:p:166-174

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