This chapter discusses some aspects of technology and its impact on trade and economy. It provides a unified and synthetic treatment of various models so that their common elements can be appreciated and their essential distinguishing features can be understood. This chapter is divided into four sections. The first one reviews the literature that takes technology as exogenous and examines the implications of productivity differences for trade patterns and the effects of technical change on outputs and welfare. Sections 2 and 3 treat dynamic models in which the evolution of technology is endogenous. In Section 2, technological progress is viewed as an accidental byproduct of production activities, while in Section 3 it results from deliberate investment. The various sub-sections explore the implications of alternative assumptions about the form of industrial innovation and the nature of technological spillovers. The last section presents a discussion of the effects of trade and industrial policies, of trade based on imitation in a setting of imperfectly-protected intellectual property rights, and of direct foreign investment and international licensing as vehicles for technology transfer.