Technology-Difference Models

Abstract

We noted in Chapter 2 that one interpretation of the Ricardian model is that its central feature is the presumed difference in technology between the two countries concerned. There is a divergence of opinion among economists on the weight that should be given to technological differences as an explanation of trade flows. At one extreme, some economists are unwilling to accept any model that has technological differences as its central feature. One basis for such an argument is that what we may perceive as a technological difference is in fact due to the omission of a factor of production. So, for instance, the absolute ‘technological advantage’ of Portugal in Ricardo’s model may be a consequence of Portugal being better endowed with a factor we may call ‘climate’ which is important in the production of both cloth and wine, and its comparative ‘technological advantage’ due to wine being ‘climate-intensive’.