Trade in Technological Knowledge and the National Advantage

Abstract

The optimal trade and licensing policies for a country which is the only owner of the technology to produce a good are developed in a general-equilibrium two-countries model. The analysis emphasizes the monopolistic position of the owner of the technology, and is essentially static in the sense that no process of generation of new technology is considered. The optimal behavior obtained turns out to entail (a) the full exploitation of any monopoly and/or monopsony power that the owner of the technology may possess with respect to the foreign market for his product and the foreign market for the factors which may be used in its production, and (b) full, competitive behavior with respect to the use of domestic resources and the sale of his product in the domestic market.