Technology adoption: on the non equivalence of tariffs and quotas*

This paper examines the effects of trade policies on the adoption of new technologies. A two-sector model with international-trade is developed where technological progress is neutral. A group of interest (suppliers of skilled labor), acting in coalition, decide which technology will be available for firms. The key findings are the following. (i) With free trade, or a tariff, the best technology is always used; (ii) Under a quota, generally the best technology is not used. In other words, with respect to adoption of new technologies we have equivalence between free trade and tariffs. A quota generates resistance to new technologies while with free trade or tariffs this resistance is eliminated.words, with respect to adoption of new technologies we have equivalence between free trade and tariffs. A quota generates resistance to new technologies while with free trade or tariffs this resistance is eliminated.