Factor endowments are usually taken as given in trade theoretical analyses of technological change. We use the Deardorff (1974) diagram to show how the steady state capital labor ratio endogenously adjusts to technology shocks in a two-sector small open economy, an effect which has largely been...

Economists emphasize the welfare gains of unrestricted trade, but politicians worry about the income distribution effects of increased competition. We show that the welfare gains of a trade shock become ambiguous if inaccurate information hinders optimal income redistribution with distortionary...