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North-South Trade, Income Distribution, and Welfare Effects of R&D Policy

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  • Okamoto, Hisayuki
  • Woodland, Alan D

Abstract

The paper considers an extension of the Flam and Helpman model of North-South trade in which the government of South organizes and pays for R&D activity to reduce the production cost of quality-differentiated products. The main conclusions are the following: South has a welfare incentive to initiate R&D activity under some conditions on effectiveness of R&D in improving the technology. By doing so, South can increase the production of higher-quality differentiated products. North suffers a welfare loss from this R&D except in the case where the effectiveness of South's R&D activity is unusually high. Copyright 1998 by Blackwell Publishing Ltd.

Suggested Citation

  • Okamoto, Hisayuki & Woodland, Alan D, 1998. "North-South Trade, Income Distribution, and Welfare Effects of R&D Policy," Review of International Economics, Wiley Blackwell, vol. 6(1), pages 15-29, February.
    • Handle: RePEc:bla:reviec:v:6:y:1998:i:1:p:15-29
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