Quarterly Review 1911

Resistance to New Technology and Trade Between Areas

James A. Schmitz, Jr. | Senior Research Economist
Thomas J. Holmes | University of Minnesota, Federal Reserve Bank of Minneapolis

Winter 1995

Historically, competition, or the extension of markets, has repeatedly brought tremendous increases in wealth. However, there is still plenty of uncertainty among economists as to why that is so. This article develops a model in which competition, modeled as the movement of goods between two areas, reduces resistance to new technology and, hence, leads to increased technology adoption and wealth. Here, the extension of markets leads to wealth increases because it reduces activities that block the use of new, more productive technology.

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