ABSTRACT
The notion that international and interregional trade flows are related to systematic, country-specific differences in technological knowledge has a long history in economic thought. This line of thought can be traced from David Hume to David Ricardo, and from Ricardo to modern technology gap theory. If unifying themes can be found in this disparate body of thought, it is in the non-public-good aspect of technology, and in the link between trade patterns and macroeconomic outcomes. The mainstream view of technology and trade suggests that technology’s importance in determining trade flows diminishes over time because of the easy of technology transfer.1 The transfer of new technological innovations allows theorists to assume that each country maximizes welfare according to identical production functions. Technology gap theory, while it allows for the important public-good aspect of technology, views technological asymmetries as important long-run determinants of trade flows. Moreover, it also captures interactions between trade flows and changes in long-run growth patterns and levels of employment.
