Can Productivity Progress in China hurt the US ? Professor Samuelson's Example Extended

Abstract

This paper develops a general equilibrium 3-good Ricardian model that extends Professor Samuelson's example on the impact of productivity progress published in JEP (summer 2004). Our model highlights Professor Samuelson's insight that productivity progress can change the pattern of trade which in turn can have dramatic welfare implications. It also shows that while Professor Samuelson is correct that productivity growth in one country can hurt another, the loss is not as permanent as his example appears to suggest. Continuing productivity growth in one country is likely to benefit all trading countries in the long run.3-good Ricardian model, impact of productivity growth, globalisation