The Interaction Between Technology Adoption and Trade When Firms are Heterogeneous

Posted: 7 Apr 2010 Last revised: 20 Feb 2021

See all articles by Bulent Unel

Bulent Unel

Louisiana State University, Baton Rouge

Date Written: March 20, 2012

Abstract

This paper develops a monopolistic competition model with heterogeneous firms to study the interaction between technology adoption and trade in a world of two countries facing different technology adoption costs. It shows that a reduction in the technology adoption cost in one country increases the productivity, induces more firms to adopt advanced technology, and improves welfare in this country, while decreasing the productivity, inducing more firms to switch back to old technology, and reducing welfare in the other country. Furthermore, although a reduction in transport costs always makes the country with lower adoption cost better off, it can hurt the other country.

Suggested Citation

Unel, Bulent, The Interaction Between Technology Adoption and Trade When Firms are Heterogeneous (March 20, 2012). Available at SSRN: https://ssrn.com/abstract=1586083 or http://dx.doi.org/10.2139/ssrn.1586083

Bulent Unel (Contact Author)

Louisiana State University, Baton Rouge ( email )

Department of Economics
2134 Patrick F. Taylor Hall
Baton Rouge, LA 70803
United States

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