| Standard trade theory theorizes that the cause of international trade is the cost comparative advantage, while the Heckscher-Ohlin trade model recognizes that factor endowment is the factor that drives the international trade. If we look at the current trade pattern among nations, we can say that those models are unrealistic.;The more recent development of trade models predicts that technology plays a very important role in trade. However, the majority of these models do not emphasize which technology has the greatest effect on trade. The emergence of a new techno-economic paradigm gives strong emphasis on this issue.;Those models implicate different sources of competitiveness. In the new techno-economic paradigm, the source of competitiveness rests on the mastery of a new technology which is translated in economic terms as the ability to produce and to export products from this type of technology. Hence, the investigation of competitiveness of the Indonesian economy is directly addressed to the production and export of those goods.;This was done by using two different models. In the simple model, the examination is accomplished by searching the fulfillment of conditions of competitiveness. In the advanced model, the investigation of competitiveness was conducted by making interpretation to the magnitude of elasticities.;The simple model indicates that the Indonesian economy is not competitive. But, the country is on the way to being competitive. This finding is confirmed by the results of the advance model.;In addition to those major findings, there are by-products as a result of the estimation. First, domestic fixed inputs and technological change support competitiveness. Second, the relations among an element of fixed input and the other inputs are complementary except for the one between labor and human capital which is substitutive. Third, the change in the production of outputs (and the variable input) generate different incomes for fixed inputs. Fourth, the nature of technical change in the country in relative terms uses more capital, human capital and resources, but it saves labor. |
