Technology and Income Distribution Issues in Trade Models

In a world characterized by global competitive market conditions, technological improvements initially localized in one sector of one country cause real income changes at home and abroad, sometimes in paradoxical fashion. A foreign technological advance in the production of a commodity not produced at home may worsen the home country's real income. As well, a foreign technological advance in a commodity the home country exports may serve to raise home real incomes. These paradoxes are explained and related to the basic proposition that a country moving from autarky to free trade must gain.