ABSTRACT
The adoption of more efficient technology and the accumulation of factors of production are generally assumed to increase the real income available to an economy. But when a country is following a protective policy improved efficiency in the protected industry or accumulation of the factor used intensively in that industry will actually reduce the country’s real income, over a range of change set by the degree of protection. This possibility of income-reducing growth is relevant to the fact that countries industrialising by means of protectionist and import-substitution policies are frequently dissatisfied with the results. This note presents a formal demonstration of the possibility, in terms of the standard Heckscher-Ohlin model of international trade.
