GEP Research Paper 00/01

Trade Liberalisation and Technology Choice

Rod Falvey and Geoff Reed

This paper was subsequently published in Review of International Economics , Vol. 8 (2000), pp. 409-419.

Abstract

This paper considers the links between trade liberalisation and technology choice in the non-liberalising country. Trade-liberalisation-induced changes in relative product prices have direct effects on equilibrium relative factor returns. The consequent changes in relative input costs may also lead producers to switch to alternative technologies, which will in turn induce a further indirect change in relative factor returns. Will this indirect affect exacerbate or ameliorate the direct effect on relative factor returns? We find that this depends on the relative cost savings across sectors and factor cost shares.

Issued in March 2000.

This paper is available in PDF format .

Published in Review of International Economics , Vol. 8 (2000), pp. 409-419.