Technological change and welfare in an open economy with distortions

Traditional measures of technological change, such as the rate of technical change, are based on producer-oriented prices. Here, we employ a general e quilibrium analysis of an open economy to examine how the consumer welfare gain from a technological change, measured as Hicksian equivalent variation , is related to the rate of technical change. the biases of the technologic al change, and tax distortions in the economy. An analytical solution shows these relationships in a readily computable framework. and demonstrates th at the rate of technical change will equal the rate of welfare change in on ly very unrealistic cases.