Exogeneous Technical Progress and International Trade : Is It Outdated?

In traditional theory technical progress as a cause of growth is not only artificially separated from increase in factor endowments but it is also exogenous, in the sense that technological improvements fall on the economy like manna from heaven. Technical progress, however, usually derives from activities directed at procuring it, hence it is normally endogenous. Effects of the various forms of exogenous technical progress on international trade (volume and pattern of trade, terms of trade and on welfare) are examined. These effects are compared with those obtained when endogenous growth and/or endogenous technical progress are taken into account. Johnson's orthodox analysis, Findlay's extended Heckscher-Ohlin model and Grossman and Helpman's model of product cycle are showed to give different results. However, as in the case of strategic policies in a static context, results of government intervention in a dynamic context are heavily model dependent.