The Effects of an Innovation: A Trade Theory Approach

Walter Diewert

Canadian Journal of Economics, 1987, vol. 20, issue 4, 694-714

Abstract: This paper treats an innovation as the sudden appearance of a new tech nology that can either produce a new good or existing goods more effi ciently than existing technologies. Prices of internationally-traded goods are regarded as fixed as are the economy's endowments of primar y factors. Under these assumptions, the paper shows that a small, ope n economy cannot lose if the new technology is adopted, even if all m onopoly profits are repatriated abroad.

Date: 1987
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