International technology transfer to developing countries: When is it immiserizing?

Abstract

Technology transferred from a developed country to a developing country may hurt the welfare of the latter: such a transfer may be immiserizing. Even if this statement is commonly acknowledged in the international trade theory, the conditions and limits of such an adverse evolution have never been analyzed in depth. Using a Ricardian setting, we build a two-country model taking into account the fundamental factors of the free trade equilibrium. Then we show that technology transfer is a shock which may result in a change of the specialization pattern of the developing country. This change is a buffer which protects it against the adverse evolution of the terms of trade. Immiserizing growth is the exception rather than the rule. Finally the specific conditions of a decline of the developing country's welfare, following the technological transfer, are disclosed.