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Technology Transfers and Industry Closures

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  • Daniel Léonard
  • Ngo Van Long

Abstract

There has been a shift of manufacturing industries from OECD countries to emerging countries. In a competitive global economy increases in productivity in any country are generally welfare-enhancing. The established industrialised countries can suffer from the collapse of some industries, and from the associated increase in unemployment. We model this process and analyze the interactions between various rigidities that cause it, such as the minimum viable scale of an industry or the number of workers who lack the necessary skills to change jobs. When, under free trade, the technology transfer causes the manufacturing industry to collapse in the home country, it experiences a discrete drop in welfare and the price of the manufactured good rises sharply. Further transfers may reverse these results. The optimal level of protection is the minimum size required to operate. Conditions that make supporting an ailing industry worthwhile can be interpreted in several ways but the conclusion is inescapable: technology transfers adversely affect arguments for industry protection at home. Certaines industries ont disparu des pays de l'OCDE et ont émigré dans les pays émergents. Dans un monde globalisé, les avances technologiques sont bénéfiques mais les pays avancés souffrent du chômage qui en est la conséquence parce que certains employés n'ont pas les qualifications requises pour d'autres empois. Nous analysons les conséquences de ces transferts de technologie qui peuvent être la cause de la disparition de certaines industries. Quand cela arrive, le pays souffre d'une diminution sévère de bien-être, qui peut être renversée avec d'avantage de transferts. Si un pays veut soutenir son industrie, la meilleure taille est la plus petite. Au final, la conclusion est claire : les transferts de technologie militent contre un support de l'industrie.

Suggested Citation

  • Daniel Léonard & Ngo Van Long, 2012. "Technology Transfers and Industry Closures," CIRANO Working Papers 2012s-27, CIRANO.
    • Handle: RePEc:cir:cirwor:2012s-27
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    References listed on IDEAS

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