A Research on the Means of Technical Progress and the Change in the Terms of Trade

On the differentiation product model assumption of monopolistic competition,two kinds of technical progress are introduced into the cost structure,that is,the capital saving technical progress and the labor saving technical progress. The labor saving technical progress of our country increases the production of the same kind of products and the terms of trade drop; however,the capital saving technical progress can increase the kinds of different products and the terms of trade rise. The relationship between the capital-labor ratio in China's industrial products and the change in the terms of trade validates the theoretical model initially.