The possibility of reversing the trade pattern with internationally-diffused localized technical progress

This paper considers the impact of localized technical progress (gains in technology which are confined to specific capital—labor ratios) on the pattern of trade. It is shown, in the context of a two-sector model, that technological improvements which are localized to particular techniques can cause factor intensity reversals so that, even if production functions are internationally identical, the pattern of trade between nations may depend not only on relative factor endowments but also on the relative magnitudes of technical progress in each sector.