Welfare Effects of Technology Transfer

This paper examines the welfare effects of aid tied to technology transfer in a two-country general equilibrium model. In the recipient country, some factors of production employed in a particular industry are difficult to use in other industries because their properties are specific to that industry. Technology transfer facilitates 'factor movement' and improves the efficiency of factor markets in the recipient. We identify and interpret the conditions under which technology transfer benefits the recipient and harms the donor. We also show that technology transfer can enrich (or harm) both the donor and the recipient under certain conditions. Copyright 2006 Blackwell Publishing Ltd