Static effects of technological borrowing on national income: A taxonomy of cases

Static Effects of Technological Borrowing on National Income: A Taxonomy

of C ases

By

Albert Berry

C o n t e n t s : I. Introduction. -- II. i. Technological Transfer Effected by National Firms or the Public Sector: Domestic Factor Markets Perfect; 2. Purchased Technological Transfer; 3. Technology Inflow under Imperfect Domestic Factor Markets. -- I I I . Technological Transfer in the Context of the Foreign Investor: I. Technological Transfer Effected by Foreign Firms with No Market Power; 2. Technological Transfer Effected by Foreign Firms with Market Power. -- IV. New Products, New Technology and Changing Consumer Tastes. -- V. Summary.

I. Introduction

T echnological change and capital form, ation are recognized as the

two principal sources of an economy s growth in income or ou tput per capita. I t is, accordingly, not surprising tha t developing countries

give increasing attention to the process whereby they borrow technology (from more developed countries, or from other countries in general), and to whether and how to induce foreign capital to enter the economy; since new technology is frequently linked to foreign direct investment , the effects of capital inflow and technology inflow must be analyzed joint- ly. Par t ly because of the complexity and difficulty in describing and meas- uring technological change (due to its t ime dimensions, the substi tut- abilities involved, and so on) the theoretical discussion of technological transfer has lagged well behind tha t of capital transfer. Recent work has, however, begun to cast light on this previously neglected a r e a l The ulti-

a Particularly relevant are W. Paul Strassman, Technological Change and Economic Development - - The Manu/asturing Experience o/ Mexico and Puerto Rico, Ithaca, N.Y. , x968. - - Howard Pack and Michael Todaro, "Technological Transfer, Labour Absorption, and Economic Development", Ox/ord Economic Papers, N.S., Vol. XXI, x969, pp. 395 sqq. - - Howard Pack, "Employment and Productivity in Kenyan Manufacturing", Eastern

Stat ic Effects of Technological Borrowing on National Income 581

mate impact of a new technology borrowed from abroad may have many determinants, interacting in a fairly complicated manner; any simple theoretical abstraction must be complicated before having policy relevance. I t seems nevertheless of value to isolate some aspects of the process with a view to generating a limited number of bench mark cases. A priori considerations suggest that the gains from borrowed technology are likely to depend on (a) how well the country's factor markets function; (b) whether the technology is transferred to national firms or brought in by foreign firms; (c) with respect to the former case, whether the technology must be paid for or is free for such search and adaptation costs as may be involved; (d) when brought by a foreign firm, whether that firm attains a monopoly position or not, whether it brings capital with it or not, whether if in an import substitute industry that industry is protected by tariffs or not; and finally (e) whether the new technology is associated with a new product, and if so whether its demand has been artificially stimulated by the advertising media, etc.

The discussion below is presented in three parts: first, technological transfer without the participation of foreign firms; second, technological transfer with the participation of foreign firms but not involving changes in consumer preferences; and third, technological change cum induced changes in consumer preferences. I t is presumed that the objektive function which describes the goals of economic policy includes maximi- zation of output, improvements in the distribution of income, and high and stable levels of employment.

I t might appear at first sight that the borrowing of foreign technology by national firms should be unambiguously advantageous; but the last few years have seen increasing awareness by economists of the possible dangers of the adoption of "too modem" (i. e., too capital intensive) technologies in countries where capital is scarce and labour abundant. In that context such adoption can both lower national income and worsen its distribution; this result is more likely to occur the less accurately the prices firms have to pay for these two factors reflect their relative scarcities, i.e., the lower is the price of capital and the higher is that of

A/rica Economic Review, Vol. IV, Nairobi, I972, No. 2, pp. 29 sqq. - - R. Mason, The Trans/er o] Technology and Factor Proportions Problem: The Philippines and Mexico, UNITAR Research Report, No. io, New York, x97x. - - Richard E. Caves, " In ternat ional Corpo- rations: The Internat ional Economics of Foreign Inves tment" , Economica, N.S. , Vol.

XXXVII I , London, I97I, pp. i sqq. The question of how foreign firms select tl[eir technology has been a t tacked with greater

init ial success than the much more difficult one of the effect of their presence cure technology use. Recent contributions include Samuel A. Morley and Gordon W. Smith, The Choice o/ Technology: Multinational Firms in Brazil, Rice University, Program of Devel- opment Studies, Houston, I974.

582 A l b e r t B e r r y

labour. In the real world, factor market imperfections are probably one of the major sources of exceptions to the general expectation that borrowing of technology is beneficial to a country; this possibility is most acute in the case of national firms and of foreign firms which use domestic capital; when foreign firms bring their own capital, the problem of wastage of a scarce resource may not arise.

I t would seem, intuitively, that loss to the country could occur when foreign firms bring new technologies, the profits from which go abroad. Loss might seem especially likely when their presence knocks national firms out of production, when they bring none of their own capital with them, and when they can attain positions of monopoly power; and it is a well-known fact that foreign investment occurs primarily under conditions of imperfect competition. Concern about the joint impact of foreign investment cum technological transfer is understandable. As the discussion below shows, such fears are sometimes misplaced, sometimes not. Particul- arly conducive to national loss are situations where the foreign firm(s) has (have) tariff protection and/or ability to restrict entry by legal or other noneconomic means (frequent when licensing systems are used). That foreign firms take their profits abroad, or compete national firms out via superior technology are not normally causes for concern, unless they lead to problems not captured in the traditional economic models we use here.

A final concern, with the introduction of new products, warrants perhaps the most serious consideration of all, though it is little amen- able to economic analysis. New technology often means new products, and the advertising and demonstration effects which make them popular deserve serious scrutiny.

II.

x. T e c h n o l o g i c a l T r a n s f e r E f f e c t e d b y N a t i o n a l F i r m s or t h e P u b l i c S e c t o r : D o m e s t i c F a c t o r M a r k e t s P e r f e c t

Assuming, as is usually the case, that the introduction of new technology involves search and adaptation costs, interesting questions arise as to how a country should undertake the search process x. Suppose the existing

i I t could, of course, be assumed that technological transfer from other countries simply "occurs." There may then be no policy questions of interest to discuss, unless it is possible to erect selective barriers against certain technologies (cf. selective tariffs against certain imports) ; but an operative definition of technologies is much harder than one for goods.

I t may be noted that, were both capital and technological inflows unhampered by any market imperfections, the impact of technological transfer of the sort which normally occurs, i .e., involving more capital intensive technologies - - ones which keep capital productive despite relatively low labour capital ratios - - would tend to increase the attractiveness of capital inflow.

Static Effects of Technological Borrowing on National Income 583

activities which will produce Ioo units of good X can be described by the isoquant Ha H~' of Figure I. 1 Meanwhile, technology existing somewhere in the world would permit any of the activities described by the isoquant WaW' a - - which could therefore be described as the economy's "potential isoquant." Between these two isoquants lie search and adaptation costs. Although precise prediction of the benefits and costs of finding and adapting various new technologies is usually impossible, some relevant considerations can be brought to bear, and some suggestions made about the relative efforts which should be exerted in different directions s. Suppose that the country's current factor price line is given by Hp Hp, and the price line anticipated for the time when the activities of WaW~ could be in service (say n years hence) is Hp, H ' (It may be expected

PI"

in the typical economy that the relative cost of capital will fall over time.) At the present time, the optimal technology is represented by point A; after n years, any activity represented by a point on the line Hpl Hp' implies the same gain in potential efficiency, given the predicted relative factor prices. I t would seem unlikely that a search for technologies like B or C would be a good bet, since a greater proportional decline in inputs/ output would be required to reach them than would be true of, say, a point in the range DE. Thus, in the absence of some expectation that the amount of technological change (defined by the percent decrease in the inputs required to produce a given output) per unit of search cost would be substantially less moving in along ray OB or ray OC than along a ray near OA, concentrating effort in those directions would be a bad investment. All this abstracts from income distribution aspects; if improvement of distribution is a concern, the advantages of focusing on more labour intensive techniques would be increased.

i For simplicity -- although this is clearly not likely to be accurate -- assume that all

of these technologies or activities are either currently in use in the country or could be put

into use without set-up costs. In fact, at a point of time the "short-run" isoquant is likely

to involve a limited number of activities which "suggest" the form of an isoquant such as

the one drawn here; but for intermediate factor proportions the factor inputs required

would be greater than those shown here; the isoquant would have a sort of kinked appearance.

The longer-run isoquant would be smoother, since the set-up costs of moving to intermediate

activities would not loom very large when averaged over the long run.

Note also that if it is desired to describe the factor combinations with which the economy

as a whole can produce multiples of xoo units, then the kinked short-run isoquant just

described would not occur, but rather a series of points connected by straight lines, with

intermediate factor proportions implying that some firms produce at one factor proportion

and some at another.

�9 For a formal treatment of some of the economics of technological change see William

D. Nordhaus, Theory o/Endogenous Technological Change, Cambridge, x967.

Weltwittschaftltches Axchiv Bd. CX. 38

584 Albert Berry

Figure I

'W~ H~

;J ~. H0,, s

A

01 Labour

In fact, there is no general reason to expect that the costs of a given percent increase in factor productivity will be similar across different factor intensities; it may, for example, be more difficult to raise the productivity of labour intensive activities, (e. g., those in the neighbour- hood of the ray OC) than of more capital intensive ones (e. g., to move from A to D or E). Or, in terms of the improvement of a specific existing activity, different types of technological change (i. e., change involving different degrees of factor-bias) may have quite different price tags and/or degrees of feasibility. For the world as a whole, technological change is labour-saving over time; and at a given point in time different countries have different existing production functions and are generating new technology in certain (probably somewhat different) directions, implying gradual shifts of their actual production functions or isoquants over time.


In Figure 2, for example, where Ha H" is again the home country isoquant, one might anticipate that the existing production function in the U. S. A. would be composed of isoquants like US a US~, with each of the activities lying in what would for the home country be the "quite capital intensive" range, and with the isoquant tending to be fairly close to linear, with slope reflecting the factor price ratio in the U.S.A. The existing isoquant in Japan would be somewhat different, say Ja J*'. with the observed factor proportions probably overlapping those of the U.S.A. - - this would depend on the particular product and the range of possible activities in its production. The Japanese wage/cost of capital ratio would be lower than in the U.S.A., but higher than in most developing countries, so if Jp J~ represents that ratio in Japan, it would have a steeper slope than Hp Hp. An additional complexity arises in most developing countries, in that markets are more likely to be imperfect, so that different producing firms may face widely differing absolute and relative factor prices. This

Figure 2

J;

OI Labour

38*


is presumably the main reason that such a wide range of factor proportions and technologies are frequently observed at one point in time.

It is plausible to assume that the U.S. and Japanese isoquants lie inside that of our developing country, since the U.S.A. is a major producer of technology and Japan is both a producer and an important adapter (towards higher labour intensity than the country from which it borrows the technology). It is of interest to conceptualize a third existing isoquant, Da D~, corresponding to developing countries in general, and composed of the most efficient activity found in some developing country for each factor proportion. Presumably this isoquant would - - like that for many LDC's themselves - - cover a wide range of factor proportions; it would presumably lie outside the U.S. isoquant over most of the factor proportion range at which U.S. firms operate and, similarly, outside the Japanese isoquant for most of the Japanese range; it would, however, lie inside that of the home country for all but those few factor proportions at which the said country is a most efficient producer. It seems probable that this isoquant would lie farther inside the home country isoquant for high labour/capital ratios since, with the exception of situations involving recent patents or technologies which can otherwise be kept secret for considerable periods of time, the diffusion of more capital intensive technology - - that used by the developed countries themselves - - appears to be more rapid than that of labour intensive activities. This is true in part because foreign investment is a major instrument in the diffusion of capital intensive technologies; further, since many developing countries feel that their growth can be best achieved by adopting capital intensive technologies, they search for them with more vigour than for labour intensive ones; finally, the most efficient of the labour intensive technologies are probably scattered among many different countries, making the search process more difficult than for capital intensive technologies, so that even if a comparable effort were exerted in this direction, less success might be expected 1.

The envelope of all the separate isoquants corresponding to different countries or regions of the world is the existing world isoquant. Since increases in attainable factor productivity tend to occur primarily within the range of technologies at which an economy is actually operating *, most newly generated technology and much learning occurs in the developed countries (where the bulk of production occurs); the rising wage/cost

I Measured in terms of the percent increase in factor productivity per unit search and adaptation costs.

i Much of the increase in total factor productivity over time is associating with learning and perfecting the operation of certain activities.

Static Effects of Technological Borrowing on National Income 5.87

of capital ratio found in these countries tends to induce a fall in the relative marginal productivity of labour compared to capital at any given factor proportion, with the result that the world isoquant tends to shift inward more rapidly in the capital intensive range and less so if at all in the labour intensive range. In planning its technology search, a country must take into account both the current world production function and how it evolves over time. For any given developing country it will be true, of course, that search costs are less in certain other countries - - where, for example, language or other communication barriers are less, where favourable relationships exist so that the other country is anxious to have the transfer occur, and so on. For each existing technology there is a subjective probability distribution of search and adaptation costs, involving the determinants cited above, among others. To the extent that rising factor productivity can be achieved only with increasing search and adaptation costs, the optimal technology will often not be the world's most advanced. Optimal adoption is further complicated by the fact that if technological change is likely to occur in the near future, it may be wise to postpone some investment; more generally, the optimal over time distribution of investment depends on the expected path of technological change.

2. P u r c h a s e d T e c h n o l o g i c a l T r a n s f e r

Technology which is under patent can often be " rented" by the payment of royalties to the patent holder; much other technology would involve heavy learning costs if a firm simply tried, on its own, to adopt and use it, and much is tied to capital or intermediate goods controlled by someone (often the patent or ex-patent holder) : in other words technological advance is often embodied in such a way that it can only be acquired by outright purchase or by the payment of (a) monopoly rents to the services of installers adapters, or (b) monopoly rents in the sale of the intermediate or capital goods 1. Imperfection exists in each of these situations but the decision with respect to acquisition of technology is in principle not much more complicated than in the previous cases; there is now an additional cost which must be added to those of search and adaptation. In the simplest case (payment of royalties) there are no other obstacles to the use of a technology besides the payment for the right. In the more likely case some costs of transfer are at least part ly hidden in monopoly control of the capital or intermediate goods involved.

1 In this connection, see, for example, Constantine V. Valtsos, Transler o! Resources and Preservation o! Monopoly Rents, Economic Development Report, No. x68, Cambridge, Mass., June x97o.

5 8 8 A l b e r t B e r r y

Perhaps the major difference between the two situations is the possibly greater difficulty of prior evaluation of benefits and costs in this latter case; to the extent that the selling firm has a carefully plotted strategy, it might be able to take advantage of a domestic firm which has installed the needed equipment by raising input prices when the latter is more or less locked in. These are empirical questions.

3. T e c h n o l o g y I n f l o w u n d e r I m p e r f e c t D o m e s t i c F a c t o r M a r k e t s 1

It is clear that in most underdeveloped countries factor markets are far from being perfect, so any conclusions based on perfect market models must be carefully reconsidered before being taken seriously. With respect to the labour market, it is normally argued that some firms - - those whose workers are organized into labour unions or which cannot avoid minimum wage legislation - - pay a wage above the social opportunity cost of labour, while others, such as family enterprises, pay a price approx- imately equal to its social opportunity cost. In the case of capital the situation is different; favoured firms (usually large ones) receive credit below the equilibrium price and discriminated ones pay an above equihbri- um price (sometimes infinity, i .e., sometimes they simply canno t get credit). Since the two distortions reinforce each other in their effects on the "wage/cost of capital" ratio, that ratio may vary widely across different firms, usually bearing a strong positive association with firm size. In this context there is danger that the introduction of modem technology to the firms facing relatively high wage/cost of capital ratios will both decrease national income and worsen the distribution of income. This possibihty is illustrated in Figure 3, where the isoquant Ha H~ corresponds to output of Ioo units and Hp~ H~m shows the factor price line facing "modem" producers in the industry; A is the profit maximizing factor combination for one of these firms. Meanwhile, CC' gives the relative social opportunity cost of the two factors, indicating that relative to capital, labour is overpriced in the market (i. e., it has a higher market price/social opportunity cost ratio than capital). The socially optimal factor combination would be point B.

Now technological change typically involves an increase in capital intensity and (by definition, if the new technology is to be applied) a

The possibility, discussed below, tha t with domestic factor marke t imperfections a new technology which raises profits for some adopting firms may at the same t ime lower nat ional income, is also present when product markets are imperfect; for example, a technological improvement in a competit ive indust ry in an economy where some industries are monopolized can lower national income. But such a case appears to be less l ikely than the one discussed here, so our focus is on factor market imperfections.

Static Effects of Technological Borrowing on National Income

Figure 3

589

H~

C

C~

H~

01 Labour

decrease in costs. Point E - - a new activity corresponding to the production of zoo units of the good - - lying above the ray OA (and thus more capital intensive than A) and below the line Hpm H~m (lower cost than A) - - therefore fits this description. But the adoption" of this new technology, although it would improve profitability in the industry (costs fall by DE/OE percent), and probably lead to its expansion x, would at the same time decrease national income. As already noted, technology A is inferior to technology B from a social point of view; quantitatively, the difference can be measured by the ratio of the number on the iso-social cost line through A (CA C~) (all iso-social cost lines are parallel to CC') and that through B (CC' itself) ; in this case, the ratio is OD/OF. Which of technology E and technology A (the two alternatives for the modern firms) is superior depends on whether the iso-social cost line through E (CE C~) is above or below that going through A; in the case shown technology E requires more real resources to produce IOO units of the good than does A, even though it costs less in private market terms; this is the same as

1 As long as the price of the product falls.

59 ~ A l b e r t Berry

saying that the switch from technology A to technology E will decrease national income. The adoption of technology E will also worsen income distribution, since the capital/output ratio in industry X will rise and the labour/output ratio will fall; for a given output of X the demand for capital will rise, pushing up its retuln and that for labour will fall, pushing down its return 1.

Had the new technology lain in the triangle CAAG, it would have been more capital intensive than A, but would have led to an increase in national income; capital intensity rises as long as the new activity is represented by a point above OA, and national income is increased when the Point is below the iso-social cost line C^C~ through point A. The adoption of technology J would thus increase national income, though it would worsen the distribution of income. Only an activity like K would be expected to increase the labour share.

HI. Technological Transfer in the Context of the Foreign Investor

I. Techno log ica l T r a n s f e r E f f e c t e d by Fo re ign F i rms wi th No Marke t Power s

Frequently foreign firms bring new technology to a country, especially firms in manufacturing or other sectors where organizational and manage- rial advances are important components of technological change. Normally technological advance is associated with some market power 8, so it may be irrelevant to analyze technological transfer and/or private capital inflow without taking account of the monopoly element ~ (or to analyze capital flow under monopoly conditions without taking account of technological transfer). Nevertheless, it is useful to consider the pure competition case as a bench mark, for purposes of comparison with more plausible ones.

Taking the degree of monopoly power of the transferrer as given, the impact of transfer normally depends on whether capital also flows, on whether the country does or does not have tariff protection for the products in question, and on whether the technology is gradually imitable by national firms. The simplest case is that in which no capital is brought

i We assume implicitly t~at a decrease in the labour share is equivalent to a worsening

of income distribution.

s I. e., no single foreign firm looms large in the market.

s It is often generated by a firm with some market power; other times it may be the

basis of creation of a firm with market power.

�9 See, for example, Stephen Hymer, The International Operation o/ National Firms: A Study o! Di,ect Investnwnt, Cambridge, Mass., x96o , unpubl, diss.


with the technology, it is not imitable, and there are no tariffs 1. In what may be called the case of "pure" technological inflow, the foreign firm has a production function superior to those of the national firms, but operates exclusively with local capital s . In this situation the introduction of such "technological superiority" is formally identical to the introduction of another factor - - which receives a remuneration corresponding to its contribution in the production process.

Under conditions of pure competition it is true, as in the case of capital inflow, that when the first unit of this "factor" is introduced national income will not be affected, i. e., the "technology" will be paid what the market will bear (its marginal productivity) and this will leave no surplus for nationals; but as the flow continues the foreign technology package as a whole ceases to be paid its full contribution to domestic product. If it were in some sense homogeneous, the impact of more technology would be parallel to that of more capital3; with different foreign firms competing among themselves its return would be driven down and a surplus would accrue to nationals; with a perfectly elastic supply of the technology, all of the surplus would accrue to nationals. Since the factor "technology" is not homogeneous, the analysis of the impact of non-marginal flows cannot be carried out in the context of a one-sector model. Were borrowing to come only to one industry with a number of foreign firms bringing the same technology and hence bidding down its price the analysis would be parallel. Nationals would gain as long as enough of the technology came in to compete its price down somewhat; its foreign suppliers would gain as long as its supply was not perfectly elastic so that no surplus accrued to them. Complexity arises in the relationship between total technology borrowed and total gains to nationals because of the possibly complicated relationships among industries or among different technologies used in a given industry. Still, an increase in foreign technology in use will, in the usual case, lead to a higher national income (see below).

1 I t has been increasingly noted tha t foreign firms may bring l i t t le or no capital with them (borrowing in the local capital market instead), and tha t what they do bring is, rather, a combination of superior technology and/or market advantages associated with monopoly o r oligopoly power.

2 The probably more general case where foreign firms bring in some capital along with the new technology will be referred to below.

8 At least as tradit ionally presented, with the factor treated as homogeneous. In reali ty, the capital market is not perfect, with different submarkets being only somewhat connected. The two cases are thus less different than they may at first sight appear.

For a discussion of the homogeneous capital case see, for example, G. D. A. MacDougaU, "The Benefits and Costs of Private Inves tment from Abroad: A Theoretical Approach," The Economic Record, Vol. XXXVI, Melbourne, I96o, pp. x3 sqq.

592 Albert Berry

These issues may be clarified somewhat by simple illustrations. Consider first a case where an unlimited number of foreign firms is willing to introduce a (Hicks neutral) technological improvement. Suppose that prior to the inflow, the industry can be described by the demand and supply curves DD' and SS' of Figure 4, and suppose the new technology reduces by half the inputs needed for a given output 1. The new supply c u r v e S 1 S~ will then have the following characteristics:

(a) its intercept will have a value equal to i /20S;

(b) to produce output level OQ1, equal to twice OQ (the original equilibrium output level) the same total amount of factors are required as to produce OQ in the pre-technological change situation; for each additional unit of output, however, only half as many units of the inputs are required so the new supply price at OQ1 equals one half of the old supply price at OQ. The area SAQO equals the area SIBQ10.

D

Figure 4

Q

S;

Q~ Q~ Quantity

1 Note that, by assumption, no foreign capital accompanies the new technology.


If, as in the example shown, the demand curve has greater than unit elasticity, then the total amount of capital and labour used in the production of the good will rise, so factors' surplus (producers' surplus) will rise. In the case illustrated, the introduction of the new technology leads to a gain of PACP2 to nationals in the form of additional consumers' surplus, and a gain of P2CBE in the form of additional producers' surplus. Since foreign suppliers of the technology are assumed to supply it at a zero reservation price, they compete their gains from its use down to zero 1.

That such gains to the nation - - clear in the one-industry case - - may occur on an economy - - wide scale can be seen most easily in certain special cases. Suppose the same degree of (Hicks neutral) technological change 2 is introduced into all domestic industries with its supply to each industry perfectly elastic, and that price and income elasticities of demand are equal for all products, then output in each industry would rise by the same percent, with total output and national income therefore also rising by that percent; once again nothing would accrue to the foreigner.

Whether technology is brought to just one industry or to all, as in the case just cited, if the supply of foreign entrepreneurship available to introduce the new technology is not unlimited, then gain does accrue to the foreigners and gains to the nation are less. In the special case where a marginal amount of production in each industry is undertaken using superior foreign technology then almost all (asymptotically close to IOO percent) of the gains accrue to foreigners. Results are more complicated when the degree of technological change varies across industries, and when elasticities of demand and supply vary by product; the general result - - a gain to nationals - - becomes a probability rather than a certainty, even in the absence of such market imperfections, external effects, or the like as to create complicated second-best type situations. The fact that total gain need not always rise with each addition to the foreign technology at work in the country, even with perfect markets, et al., follows from the fact that a technological gain in one industry may raise the producers' surplus accruing to nationals in that industry less than it lowers the comparable surplus in some other industry(ies), in which foreign technology is involved 8.

1 I. e., they receive only enough income to pay for the cost of effecting the transfer, a t a normal profit rate.

' I. e., total factor productivi ty is raised by the same percent in each industry.

s Consider a good X, with quite inelastic demand and supply curves. Introduct ion of foreign technology leads to a slight r ightward shift in the supply curve which, however, leads to a sharp decline in price. The increase in consumers' surplus may be vi r tual ly offset by the decrease in producers' surplus for nationals. The sharp price decline may, however, lead to substant ial effects on the incomes of factors of production used in the production


Figure 5

~O O -c-

O.

D'

The presence of tariffs has similar implications for the effects of technology inflow as for capital inflow, i .e. , it creates a new case in which those effects can be negative 1, and thus probably raises the overall likelihood of that result. Consider the industry portrayed in Figure 5- SS' is the original supply curve and the static income loss due to the

of s u b s t i t u t e s a n d complemen t s . I n c o m e a c c r u i n g to fore ign t e c h n o l o g y cou ld r ise a n d t h a t of n a t i o n a l f ac to r s cou ld fall b y m o r e t h a n e n o u g h to o u t w e i g h the n e t ga in to n a t i o n a l s w h o c o n s u m e or s u p p l y fac to r s u sed in the p r o d u c t i o n of X. T h u s n a t i o n a l i n c o m e c o u l d fall. T h a t of n a t i o n a l s a n d supp l i e r s of fo re ign t e c h n o l o g y , t a k e n t o g e t h e r , cou ld no t .

1 In b o t h cases, tar i f fs c r ea t e n e w w a y s in w h i c h loss c a n occur . As j u s t n o t e d , t r a n s f e r of a specific piece of new t e c h n o l o g y b y fore ign f i rms c a n lower n a t i o n a l i ncome , even in the absence of tar i f fs or m a r k e t impe r f ec t i ons ; t h i s c a n n o t o c c u r in t he case of c a p i t a l inf low.

Sta t i c Effects of Technological Bor rowing on Na t iona l I ncome 595

tariff is SABPw + LMG 1. Now technological change, brought by foreigners, pushes the supply curve down to $1 St : if we assume unlimited availability of the technology at a fixed price, so that no gains accrue to foreigners, then income loss is increased to S1DCPw + LMG, i. e., the technological improvement lowers national income. But if further advances become available, dropping the supply curve to $2 S~, then the industry's presence contributes $2 Pw G - - GEM to national income. In the case of capital inflow, a similar reversal of early losses, associated with low inflow, occurs when enough capital has come in to push up the economy-wide capital/labour ratio and make protected industries efficient. In the present case, since technology is industry-specific, the parallel pat tern - - losses if the technological advance is small S but gains if the advance is large - - appears at the industry level. Given the industry-specific nature of the phenomenon, there is less reason to expect a simple monotonic relation between total technological inflow and national income than between total inflow of capital and national income. I t goes without saying that, in any cases where the foreigner receives payment for the technology brought, nationals will be better off to the extent that domestic firms can imitate and take over the new technology.

2. T e c h n o l o g i c a l T r a n s f e r E f f e c t e d b y F o r e i g n F i r m s w i t h M a r k e t P o w e r

(i) Marke t Power Based Solely on Technological Advantage s. - - The usual real world context of technological transfer by foreign firms is some degree of market power. The implications of the transfer from the country 's point of view become signally less positive when this is the case, but depend very much on the nature and context of the market imperfection. An important distinction is whether the foreign firm simply monopolizes the new technology, whether it also has power to restrict entry and whether it (and other producers of the good in question) has decreasing costs. Where the last condition holds, the alternatives may be a foreign monopoly or a domestic monopoly4; more generally a second distinction relates to the market structure under which national firms would produce in the absence of the foreign firm(s), a special case being that of no national production. As discussed below, loss is always possible in cases where the

x I f the cu r ren t loss due to the tariff wil l be ou twe ighed b y fu tu re ga ins (i. e., i t s appl i - ca t ion can be just i f ied on in fan t i n d u s t r y grounds) , t hen the presen t a r g u m e n t does no t apply .

s Or if no t enough foreigners have come in to m a k e i t genera l ly used in the p roduc t ion of the good, i. e., if the supp ly of the t echno logy is no t e las t ic enough loss can occur.

s I. e., based on a be t t e r p roduc t ion func t ion r a the r t h a n on ab i l i t y to res t r i c t e n t r y or on decreas ing costs.

' More general ly , a l l the a l t e rna t ives wil l p r e s u m a b l y invo lve imper fec t compet i t ion .


firm is able to suppress existing producers by noneconomic means 1. When the context is a single industry in an otherwise purely competitive economy and where that industry is the only one to receive foreign technology not characterized by unlimited supply at a fixed price, then loss is not possible in the combined absence of noneconomic restrictions on competitors and tariffs. When market imperfections exist in other industries, or some have received foreign technology not in perfectly elastic supply, no such generalization can be made. Gain is perhaps most likely when the firm's costs are well below the world price level and when there are no domestic producers and no tariffs; whenever the firm sells below the world price it creates a gain in the form of additional consumers' surplus, plus any factors' surplus which may be associated with the new production 2. A plausible result in this general situation (no domestic producers, no tariffs) is that the firm's presence leaves the price unchanged so national income only rises if factors' surplus is created.

Is the effect of a generalized technological inflow (to many industries) simply a multiple of the single-industry effect just discussed ? Suppose, for example, that the partial analysis of the typical industry which receives monopolized foreign technology suggests no effect on national income; because (a) price of the product is not changed, and (b) factors' surplus is not changed (true when the supply of both factors is perfectly elastic to the firm). If this replacement of imports by a technologically advanced foreign monopolist were to occur in many industries, the price of local capital and labour in terms of domestic goods would eventually be bid up and the country would gain. When partial analysis of the typical industry indicates that the foreigner's presence lowers price and raises national income, then a general flow of technology under similar conditions to other industries adds to national income, not only in the amount suggested by the partial analysis for each industry but also via the increased demand for labour and capital which gradually pushes up the price of those factors.

When a good is already being produced in the country (rather than just imported), benefits are almost sure to accrue when a foreign firm with a technological advantage arrives, as long as it does not have power to restrict entry 3. Consider first, as an example, the case where the domestic price was previously equal to the world price, without trade, i.e., there

1 I n t h a t case p r ice c a n r ise (if i t w a s p r e v i o u s l y be low the w o r l d price) a n d / o r f a c t o r s ' su rp lus c a n be d i m i n i s h e d ; the p resence of ta r i f f s inc reases the l ike l ihood of loss.

s I t is imp l i c i t here t h a t the re a re obs tac les to e x p o r t a t i o n ; in t h e i r a b s e n c e the f i rm w o u l d n o t sell be low the w o r l d p r ice in t he d o m e s t i c m a r k e t so ga ins w o u l d be l i m i t e d to f ac to r s ' su rp lus .

8 A n d loss c a n n o t occur , in the a b s e n c e of tar i f fs .


Figure 6

D

s ; /S~ ,s~

0

el

P J P:

. . . . . . . . . . t --q I ' , I

I "Rm I

Output

were neither imports nor exports. Assume (a) that the units of each factor are homogeneous but their supply price is a positive function of the quanti ty used, and (b) that the new technology is twice as productive as the old one, for all factor proportions. The demand curve facing the monopolist may now be traced out as follows (see Figure 6). For any given output by the monopolist (say OQ1), the supply curve of previous producers is to the left of its original position SS' by l& OQ1, (i.e., it is St S~) and the new total supply curve is the sum of OQt and the new


"previous producers' curve," i.e., Q1 HS~. The price implied is P1, so the pair (Q1, P1), i.e., point N, lies on the foreign firm's demand curve. The locus of points derived in this way defines the demand curve Pw NBD'. The foreign firm's average and marginal cost curves must also take account of the reaction of other firms to its output level; for the first unit average cost is 1 / 2 0 P w ; for unit Q1 it is 1/2 Q1N (or 1/8 Q3M) ; the average cost curve is, here, CaC~. As shown, it falls for low output levels and then rises. The initial level l /20Pw, is repeated for the unit Q4, where OQ4 = 20Q0 (i.e., Q, is twice the original equilibrium output); production of OQ4 by the new firm (now the only producer) requires the same total resources as OQ0 in the original equilibrium (by the older firms). Thus the supply price of the marginal bundle of factors (which determines average cost) is the same as in that equilibrium and, since the bundle is twice as productive now as before, average cost is half as high. The decreasing average cost for low output levels by the foreign firm is associated with the fact that its output increases, in driving previous producers out, lower factor prices (since those relatively inefficient producers used more factors per unit of output than the foreign firm). The marginal cost curve Ca C ' , drawn on the basis of Ca C~, cuts the marginal revenue curve - - PwJTR m - - at point W so the foreign firm produces OQ5 at the price OP 5 . I t is the sole producer. The effects of the firm's presence are :

(a) an increase in consumers' surplus of Pw FBP5 ;

(b) a decrease in factors' surplus of PwFS (the previous surplus) minus P5 GS (the current surplus)l;

(c) above normal profits of P5 BWZ to the foreign firm. Thus national income rises by FBG.

Under the present assumptions national income could never fall as a result of technological transfer. This can be seen as follows. Consider any output level X, which the foreign firm may choose, and assume that the technology it employs achieves factor productivi ty t% above that of the national firms. The total supply curve will then lie to the right

tX of the original national firm supply curve by ~ - + ~ units *. Given this,

1 Since total factor usage is the same as i t would have previously been with one half the current output, i. e., with OQ6, factor surplus, which depends only on total factor usage, is thus also the same, equal here to P5 GS.

At any given price the new quant i ty supplied will be the output of the foreign firm plus the lowered output of the nat ional firms. These la t ter will produce unti l the cost of the marginal bundle of factors needed to raise output by one unit equals this given price. In effect, since their production function is unchanged, and factor prices bear the same relation as before to quantit ies used, total factor use will bear the same relation to product price as


and the fact that the level of factor inputs corresponding to a given product price can be read from the original supply curve as long as national firms still produce something 1, it is clear tha t an area of net gain appears, like FBG of Figure 6. If national firms no longer produce, the foreign firm's output is the total output and determines the product price directly; factor use at any product price is once again given by the original national firm supply curve, so it is once again clear that national income rises.

In the presence of tariffs, gain is no longer assured; this follows from the general proposition that, given tariffs, a decrease in costs through higher efficiency can lower national income if it leads to a sufficient increase in output as to raise the product of "loss per unit of production," which is falling, times "output level." Since not all the gains from introduction of the new technology accrue to nationals in the present case, the above proposition is true a fortiori.

(ii) Trans/er by Foreign Investors with Power to Restrict Entry: Alter- native is Competition among National Firms. - - In general, market power is due to decreasing costs, to noneconomic or institutional restrictions of entry, or to technological advantage. Only the second source - - institutional restrictions - - turns out to be highly relevant in the present context. While technological advantage can, as discussed above, imply that a foreign firm faces a downward sloping demand curve, the firm is not in a position to lower total output and thereby lower national income. With institutional restrictions, on the other hand, loss seems probablO; price elasticity of demand appears to be the major determinant of the outcome. For gain to occur the foreign firm must produce more than the domestic competitors previously did, since at the same output level - - and hence the same price and consumers' surplus - - factors' surplus is less 8 than before, implying that total national income is also less. If elasticity of demand is not above unity at the original quanti ty, loss is assured; since marginal revenue at tha t output is not positive, the

before. With the s a m e total factor use, total output will be greater by that number of units which the national firms can produce with those inputs saved by the foreign firm in producing X units, i.e., the difference between the factors it uses and what the national firms would

t have used. This difference or saving is ~ (factors used by national firms to produce X

tX units); used by national firms, these shift the supply curve rightward by ~ units.

1 See footnote 2, pp. 598 sq.

s We assume that these restrictions are used to completely exclude competition. In less e x t r e m e cases , the results would fall between those described here and those of Section I I I . z. (i).

s The total input of factors being less, since less are now needed to produce a given output.

Weltwirtschaftliches Archly Bd. CX. 39

6oo A l b e r t B e r r y

monopolist would never produce that much. In the simple case of linear demand and supply (cost) curves, the condition of zero net effect is 1

2 (a, -- bl) -- 4 (c~ b I -- al) (a~ -- b~ -- 8 bl bl --

where:

Demand curve: Pd = ao + al Q

Competitive supply curve: Ps = b0 + bl Q

c o is the ratio of inputs required by the foreign monopolist to those required by the national firms in the production of a given output.

In this case, if the demand curve were infinitely elastic (e.g., if there were free international trade with no transport costs), the foreign firm's presence would, under a wide range of the relevant coefficients, raise national income s . In general, it is clear that specific knowledge of the demand and production conditions are necessary to predict whether this type of foreign monopolist will raise or lower national income.

(iii) Trans/er by Foreign Investors with Market Power Based on De- creasing Costs and Technological Advantage: Implications o/ Imper/eaive Competition among National Firms. - - Where a foreign firm has decreasing costs, as well as a lower cost curve than national films, its impact depends on how it takes account of potential entry by these latter in formulating its pricing policy. If it keeps price down to the cost those firms could achieve, the results are essentially those of case 2. (i). If potential entrants axe correctly perceived to be unwilling to risk substantial funds in com-

1 We assume the foreign firm uses factors in the same proportions as would the national firms and pays the same price for each unit of a factor. Thus its average cost curve is given by

C a = cobo + CO bx Q and marginal cost curve by

Cm= cob 0+ 2c~b 1Q.

s As can be seen by substituting a I ~ 0 in the expressions for gain under national firms (x) and the foreign monopolist (2), respectively.

(a o -- bo)~ (i)

2 (a I -- bl)

S { - -__1 b l S } where S a ~ 1 7 6 (2) T a0 - - b0 4 2C0 i bl - - zal

Welfare under the foreign monopolist would be higher if

- _ I bo V k 2c~ } 4-k 2c~ ] > (%bo)' .

S t a t i c Effects of Techno log ica l B o r r o w i n g o n N a t i o n a l I n c o m e

Figure 7

6oz

Pon I j// / s

O] Qm. Qm, Output

petition with the existing firm unless its current price is well above their attainable cost level 1, then the case shades into 2. (ii), and loss becomes a definite possibility.

If technological change characterizes industries where economies of scale are significant and where imperfect competition is the norm among national firms, the likelihood of gains from technological transfer is greater than in the case just discussed, though substantial technological advantage by the foreign firm remains a necessary condition. If that advantage is small and the national monopolist's profits large, the fact that those profits pass from national to foreign hands will outweigh the gains associated with the better technology introduced by the foreign firm.

1 P laus ib le even if t h e y bel ieve t h a t f i rm will n o t r e s o r t to n o n e c o n o m i c f o r m s of com- pe t i t i on .

3 9 e

6 0 2 A l b e r t B e r r y

Consider the case of a national monopolist who dominates the market before the arrival of the foreign firm (Figure 7). The existence of the indus~ t ry under these conditions contributes DABS to national income - - DAPmn as consumers' surplus, CBS as factors' surplus, and PmnABC as monopoly profits. If a foreign monopolist with factor productivity twice as high takes over, his average cost curve is CaC~', half as high as SS' at each output level 1, and tile corresponding marginal cost curve is CaC~. The new output level is OQ~ and the price is O P t . Consumer surplus rises by Pm~AFP~, factor surplus falls by CBKL (from CBS to LKS, where H J equals one half HG), and national monopoly profits fall by PmABC. Thus net change in income is A F M - Pn~MBKL, clearly negative. Gain appears unlikely unless demand is quite elastic or increasingly elastic for output levels above that produced by the national monopolist.

IV. New Products, New Technology and Changing Consumer Tastes

A particularly complicated situation, but again a very frequent one, is that in which a foreign firm brings a new product (or an important product modification) and engages in extensive marketing designed to persuade consumers that they need or want this product. The welfare economics of such a phenomenon is particularly complicated; economic analysis does not normally posit comparability between two states of an individual, between which his preferences have changed. But the policy maker must judge on this issue. The competing hypotheses would be something like the following: (I) the advent of a new product simply creates greater choice for the consumer, without changing the absolute utility he achieves from the consumption of any existing product, and (2) the presence of the new product decreases the individual's uti l i ty from the consumption of some existing products. Under hypothesis (i), no particular interest attaches to the introduction of a new product but under hypothesis (2) it raises a key question.

Refined psychological analysis, at a minimum, would be required to throw some light on whether and in what sense an individual is better off after a change in consumption cum change in preference pattern. I t may be presumed that his demand function for the new product after the preference system change gives an overestimate of the amount by which the joint events - - its appearance, with resulting change in his preference system, and his consumption of it - - raise his welfare, i.e., it is plausible to assume that his utility function shifts down with the advent of the new product, so that some combinations of previously existing goods

1 Assuming the monoplist combines factors the same way as the national firms would.

Stat ic Effects of Technological Borrowing on National Income 603

provide him with less utility than before. The information generated in the marketplace is not appropriate to quantify this overestimate, however I.

While the overall process of preference change is an important and perhaps partially undesirable one, it is not clear how much of it could be avoided by prohibiting the flow of foreign capital cum new products. Even when foreign producers introduce consumer goods, preferences may already have been affected by the availabihty of the good via importation. Some preference change would occur even if the product were not common in the country; and often a national firm would assure either the importation or local production of the good anyway.

V. Summary

Technological change is a source of growth. But not all types of technological change, nor all contexts, bring benefits. Three major situations call for close appraisal of the transfer, since loss to the country is a possible result: (i) introduction of new capital intensive technology in a situation of factor market imperfections, i.e., where the introducing firm faces a capital price/labour price ratio below the relative social opportun- i ty cost of those two factors; (ii) introduction of a new technology by a foreign monopolist, either in the presence of tariffs or, if the monopolist can restrict entry, even in the absence of tariffs; (iii) introduction of a new product which causes a change in preference systems. In none of these cases is loss a necessary result; in each one, the details of the case are necessary to appraise the direction of effect. The Table summarizes the results reached in the text.

I t should be emphasized that the discussion presented here is only skeletal; it considers the impact of technological transfer under certain combinations of conditions, but neglects much. Little at tention is given to which conditions tend to be causally related and therefore to come to- gether 2.

x Another important issue in the evaluation of the social implications of new products is whether individuals ' u t i l i ty from it is pr imari ly a function of their own consumption of it, or primarily a function of their consumption relat ive to tha t of other individuals. If the lat ter dominates, the introduction of a new product may have no positxve effect on overall social welfare a t all. A special case is the foreign product which is preferred because of the snob appeal of foreign named or foreign brand items. This concern with "foreignness" suggests rather strongly tha t consumption of such products is, if not a zero sum game, fairly close to it, the pleasure achieved by the consumers resting on their being able to consume the i tem while others do not.

2 E. g., decreasing costs may be associated with size and power which may be the source of abil i ty to use noneconomic restriction on the entry of nat ional firms.

604 Albert Berry

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606 A l b e r t Berry

D y n a m i c e f fec t s of s u c h b o r r o w i n g a r e p e r h a p s t h e m a i n o m i s s i o n . I s

i m p o r t e d c a p i t a l i n t e n s i v e t e c h n o l o g y t h e n m o d i f i e d in m o r e l a b o u r

u s i n g d i r e c t i o n s , a n d if so u n d e r w h a t c o n d i t i o n s z ? D o n a t i o n a l f i r m s

l e a r n h o w t o i m i t a t e a n d m o d i f y f o r e i g n t e c h n o l o g y as a d e f e n s i v e r e a c t i o n

to i t s p r e s e n c e ? D o l ega l l y b a s e d m o n o p o l y p o s i t i o n s of f o r e i g n f i r m s t e n d

t o ge t e r o d e d w h e n n a t i o n a l f i rms see t h a t t h e y c o u l d e a r n l a r g e p r o f i t s if

a l l o w e d in ? H o w does t h e p o l i t i c a l e c o n o m y of t a r i f f d e t e r m i n a t i o n

f i t i n t o t h e d i s c u s s i o n ? E v a l u a t i o n of t h e i m p a c t of t e c h n o l o g i c a l t r a n s f e r

i n a g i v e n c o u n t r y w o u l d h a v e t o b e i n f o r m e d b y a l l t h e s e a s p e c t s , a n d

o t h e r s , b e f o r e a n y c o n c l u s i o n s c o u l d b e c o n s i d e r e d d e f i n i t i v e .

$ $ $

Z u s a m m e n f a s s u n g : Pr ims des Transfers yon Technologie auf das Volkseinkommen: Eine taxonomische Klassifizierung. - - Dieser Axtikel befai3t sich mit den Bedingungen, unter denen die Einfuhr yon Technologie entweder zu einer Erh6hung oder Reduzierung des Volkseinkommens fflhrt. Die Einfuhr yon Tech- nologie wird konzeptionell yon der Kapi ta le infuhr getrennt , um die Analyse zu erleichtern. Technologie wird als ein Fak tor unter anderen betrachtet .

Wenn inlRndische Firmen Technologie einfllhren, ohne dafilr zu bezahlen, und wenn fQr die Wir tschaf t die llblichen neoklassischen Annahmen gelten, zeigt sich, dal3 Wohlfahrtsgewinne mit Sicherheit entstehen. Sollte jedoch eine der neoldassi- schen Annahmen nicht gegeben sein, gilt diese allgemeine Aussage n icht mehr. In dieser Arbeit wird die wahrscheinlichste Ausnahme schwerpunktm~0ig behandel t : Verzerrungen auf dem Fak to rmark t der inllindischen Wir tschaf t mi t i lberh6hten LShnen und zu niedrigen Preisen fQr Kapital . Auch Z611e erh6hen die Wahrschein- lichkeit yon Wohlfahrtsverlusten ftlr ein Land.

Wenn Technologie durch ausl~ndische Fi rmen (die kein Kapital import ieren mQssen, da sie ihren Bedarf im In landsmark t decken k6nnen) eingefllhrt wird, h~ngt das Resul ta t hauptsRchlich yon der Mark tmach t der Untc rnehmen ab. Haben sie keine Markmacht und sind keine Z611e vorhanden, d a n n i s t sicher, dal3 es Wohl- fahrtsgewinne (oder zumindest keine Wohlfahrtsverluste) gibt. Bei Z611en gibt es immer die M6glichkeit yon Verlusten; dies ist bei Mark tmach t nicht unbedingt der Fall - - hier kornmt es auf die Ar t der MachtsteUung an. Wenn eine F i rma einen hohen Marktante i l ausschliel31ich aufgrund technologischer Vorteile hat , implizier t dies nicht einen volkswirtschaftl ichen Verlust, sondern im Norrnalfall en t s teh t ein Wohlfahrtsgewinn. Marktmacht wird dann gefAhrlich, wenn sie auf der Fiia~igkeit beruht , den Wet tbewerb mit aul3er6konomischen Mitteln einzuschrlinken. Die Wahrscheirdichkeit eines Verlustes k6nnte sowohl durch die Exis tenz s inkender Kosten erh6ht werden als auch dutch Situationen, in denen - - soUten die ausllindi-

z For a discussion see John C. H. Fei and Gustav Ranis, "Innovation Analysis and the Technology Gap", in: The Gap between the Rich and the Poor Nalions, Proceedings of a Conference held by the International Economic Association at Bled, Yugoslavia, Ed. by Gustav Ranis, London, z972.


schen Firmen keine Machtstellung haben -- die in1~ndische Alternative unvoll- kommene start vollkommene Konkurrenz w~tre.

Ein allgemeinerer, aber ~uBerst wichtiger Punkt in Zusammenhang mit dem Import yon Technologie ist die Einf~hrung neuer Produkte. Handelt es sich dabei um Produkte, die haupts~chlich fflr demonstrativen Konsum nachgefragt werden, wird die gesamtwirtschaftliche Wohlfahrt wahrscheinlich nicht erhSht werden.

R ~ s u m d : Des effets s t a t i q u e s de l ' i m p o r t a t i o n de la t echno log ie su r le r e v e n u na t iona l : U n e classif icat ion. - - L ' ~ t ude explore les cond i t ions qu i d d t e r m i n e n t si l ' i m p o r t a t i o n de la technologie a u g m e n t e ou d i m i n u e le r e v e n u n a t i o n a l du pays . L ' i m p o r t a t i o n de la technologie es t sdparde de l ' i n f lux du cap i t a l pou r s impl i f ie r l ' ana lyse . La technologie es t consid~r~e c o m m e u n f ac t eu r qui , c o m m e d ' a u t r e s fac teurs , a une courbe d 'offre avec t o u s l e s carac t~r i s t iques .

Si des f i rmes na t iona l e s e m p r u n t e n t de la t echnologie s a n s p a y e r l ' in tdr6 t e t si l 'dconoraie op~re sous des cond i t ions s imples ndoclass iques , il es t d~mont r$ qu ' i l s en rdsu l t en t des gains. Si une des suppos i t i ons t r ad i t ionneUes ndoc lass iques n ' e s t pa s donnde, le rdsu l ta t gdn~ral n ' e s t p lus va lab le ; l ' a c c e n t u a t i o n es t mise su r l ' ex - cept ion la p lus probable : des imper fec t ions su r le ma rch~ du t r ava i l d a n s l '~conomie locale avec des p r i x t r op h a u t pour le t r ava i l et t rop ba s pou r le cap i ta l . L ' e x i s t e n c e des t a r i f s a u g m e n t e auss i la p robabi l i tg d ' u n e per te pou r le pays .

S i c e son t des f i rmes ~t rang~res qu i e m p r u n t e n t de la t echno log ie - - il n ' e s t pa s n~cessaire qu 'e l les i m p o r t e n t du capi ta l , car ils p e u v e n t faire r e m p r u n t d a n s l '6co- nomie locale - - , les rd su l t a t s ddpenden t , a v a n t t ou t , du pouvo i r du m a r c h ~ de ces f irmes. Si elles n ' e x e r c e n t pa s b e a u c o u p d ' in f luence su r le m a r c h d et s ' i l n ' y a p a s de tar i fs , des ga ins son t assurds. Des t a r i f s d o n n e n t t o u j o u r s la possibi l i t~ d ' u n e perte . Le pouvo i r du march6 n ' o u v r i t pas n~ces sa i r emen t la poss ibi l i td d ' u n e pe r t e - - cela ddpend de la n a t u r e du pouvoi r . Si une f i rme poss~de u n g r a n d t a u x du m a r c h ~ s e u l e m e n t ~ cause de l ' a v a n t a g e t echnolog ique , ce t t e s i t u a t i o n n ' i m p l i q u e pa s u n e per te - - des ga ins son t encore les r~su l t a t s n o r m a u x . Le danger , associd avec le pouvo i r du marchd , a p p a r a I t si ce pouvo i r se fond su r la capaci t~ de l imi te r la com- l ~ t i t i o n d ' u n e mani~re non-dconomique .

L a probabi l i td d ' u n e per te p e u t ~tre a u g m e n t d e pa r des f ra is ddc ro i s san t s a ins i que p a r des s i t ua t i ons d a n s lesquelles, ~ cause d ' u n e m a n q u e du p o u v o i r du m a r c h d

c6td de la f i rme dtrang~re, l ' a l t e rna t ive d a n s l 'dconomie locale e n t r a i n e p l u t 6 t la c o m l ~ t i t i o n impa r f a i t e que la c o m l ~ t i t i o n par fa i te .

U n e q u e s t i o n p lus gdn~rale m a i s tr~s i m p o r t a n t e en c o n n e x i o n avec l ' e m p r u n t de la technologic est l ' i n t r oduc t i on des n o u v e a u x p rodu i t s . Si ces b iens son t d e m a n d ~ s pour la i consp i cuous c o n s u m p t i o n , , r i n t r o d u c t i o n ne con t r i bue pa s au b ien-~t re na t iona l .

R e s u m e n : Efec tos est / t t icos de p res t ac iones de t ecnolog ta sobre el ingreso nac iona l : U n a t a x o n o m i a de casos. - - E n este a r t icu lo se e x p l o r a n las cond ic iones que d e t e r m i n a n si la p re s t ac i6n de tecnologia i n c r e m e n t a o reduce el ingreso nac iona l de u n pals . L a p re s t ac i6n de tecnologla se s e p a r a c o n c e p t u a l m e n t e del in f lu jo de capi ta l , con el f in de s impl i f icar el anAlisis. L a tecnologta se def ine c o m o u n fac to r el

6 0 8 A l b e r t B e r r y Static Effects of Technological Borrowing on National Income

cual tiene, como otros factores de producci6n, una curva de oferta con var ias carac- terlsticas.

Cuando empresas nacionales pres tan technolog~a sin pagar un precio por ello, y si la economla opera bajo condiciones neocl~sicas, se puede demost rar que con toda seguridad habr~ beneficio. Pero si uno el imina uno de los supues tos neoclAsicos, este resultado general ya no es valedero. Aqul se pone ~nfasis sobre una de las m~s impor tantes excepciones, como son las imperfecciones en los mercados de factores de la economia nacional y que ocasionan n n a sobrevaloraci6n de1 t raba jo y u n a subvalorizaci6n del capital. Tan to en este caso como en otro en que exis ten aranceles de aduana, au m en ta la probabil idad de que la prestaci6n de tecnologia le cause una pdrdidad al pias en tdrminos de ingreso nacional.

Cuando son extranjeras las empresas que prestan la tecnologla (no s iendo ne- cesario, sin embargo, que impor ten capital - - pueden pres tar en el mercado local) el resultado depende principalmente de que si t ienen o no poder de mercado. Si no lo tienen, y si no existen aranceles, el beneficio (o la no-pdrdida) es seguro. Aranceles siempre crean la posibilidad de que sur jan pdrdidas. ]El poder de mercado como tal no tiene por qud crear necesariamente pdrdidas; ~sto depende de la na tura leza del poder. Si una empresa domina el mercado debido exclus ivamente a u n a v e n t a j a tecnol6gica, la implicaci6n no es la pdrdida, sino pueden resul tar beneficios. E1 peligro del poder de mercado proviene de restricciones de competici6n en formas no-econ6micas. Costos decreeientes pueden a u m e n t a r la probabil idad de pdrdidas, como es tambi~n el caso cuando empresas ext ranjeras xlo t ienen poder de mercado pero la a l ternat iva domdstica consiste en una sJtuaci6n imperfecta en vez de perfecta.

Un aspecto m~s general pero ex t r emamente impor tan te en conexi6n con las prestaci6n de tecnologia es la introducci6n de productos nuevos. Si se t r a t a de productos que t ipicamente vienen a satisfacer un consumo conspicuo, su int roducci6n posiblemente no contr ibuya pos i t ivamente al bienestar nacional.

Static effects of technological borrowing on national income: A taxonomy of cases

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