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A general model of trade caused by international differences in production technology is developed using techniques of duality theory. For the caseof product-augmenting differences in technology, it is shown that there is a positive correlation between net export and technological superiority, such that a country will "on average" export goods for which the country has superior technolor. If some factors are permitted to be internationally traded, it is demonstrated via this correlation that the volume of trade must increase. Thus unlike trade caused by factor endowment differences, goods trade caused by product-augmenting differences in production technolody is always in this sense complementary with factor trade. For factor-augmenting technology differences, in the absence of factor trade the goods trade pattern is as if it was caused by factor endowment differences. With factor trade, goods trade and factor trade can then be either complements or substitutes.

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The current account dynamics is examined for a small open economy which is subject to exogenous changes in its static terms of trade and in world interest rates. The model used is one with overlapping finite-lived generations, which we argue gives rise to a more reasonable saving behaviour than previously used models with infinite lived consumers.In particular no restrictions on the rate of time preference is required.Anticipated and unanticipated, as well as temporary and permanent,terms of trade changes have very different effects. There is, however,a general tendency towards cycles in both savings and investment,which gives rise to cycles in the current account.The classic Harberger-Laursen-Metzler effect on saving of a terms of trade deterioration can have any sign for plausible parameter values,both for temporary and permanent disturbances.

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This paper addresses the relation between goods trade and international factor mobility in general terms. Conditions for factor price equalization are derived for situations with tradein both goods and factors,as well as Rybczynski and Stolper-Sarnuel Sofl theorems. A weak price versionof the Heckscher-Ohlifl theorem is presented, as well as stronger quantity versions.The basic theorems of international trade, suitably interpreted,are shown to hold in their strong versions ifthe number of international markets is at least as large as the number of factors.The crucial dimensionality issue is hence not the relative number of goods and factors per se, but the number of international markets relative to the number of factors. Only the price version of the Heckscher-Ohlifl theorem fails to be essentially preserved by this condition.