A COMPETITIVE GENERAL EQUILIBRIUM-MODEL OF TECHNOLOGY-TRANSFER, INNOVATION, AND OBSOLESCENCE

A general equilibrium production model is developed where technologies are embodied in capital goods of different vintages indexed in a cont inuum. A difference in the ''extent'' of existing knowledge determines a wage gap between a developed (north) and a developing region (south ). With free flow of technology, relatively ''backward'' technologies move to the south. With innovation in the north, a ''technology cycle' ' is created by which some of the technologies are pushed out of the n orth into the south. This also tends to widen the wage gap between the regions.