What Do Rich Countries Trade with Each Other? R&D and the Composition of U.S. and Swedish Trade

Magnus Blomstrom, Robert E. Lipsey, Lennart Ohlsson

NBER Working Paper No. 3140 (Also Reprint No. r1551)
Issued in April 1991
NBER Program(s):   ITI   IFM

A long tradition in international economics explains comparative advantage by differences between countries in their stage of development, or their endowments of land, labor, and capital, and suggests that universal development will reduce the importance of trade. Sweden and the United States possess similar factor endowments and have converged in overall productivity, but their bilateral trade has grown. The example of these two countries suggests that mutual technological progress may promote trade, with the new basis for specialization being the different technology levels or R&D intensities of the goods being traded, rather than the initial endowments.

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Published: Banca Nazionale del Lavoro Quarterly Review, No. 173, pp. 215-235, (June 1990).

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