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Endogenous Sunk Costs, Flexible Manufacturing and the Productivity Effects of International Trade

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  • Carsten Eckel

Abstract

The paper addresses the productivity effects of international trade in the presence of flexible manufacturing and endogenous sunk costs (cost-reducing R&D). It shows that international trade raises R&D expenditures, but this will not necessarily boost productivity because of possibly counteracting market structure effects. The analysis is conducted in general equilibrium so that implications for real wages and welfare can also be addressed. Both can fall when trade leads to excessive R&D investment. Copyright � The editors of the "Scandinavian Journal of Economics" 2009. .

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 111 (2009)
Issue (Month): 2 (06)
Pages: 369-386

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Handle: RePEc:bla:scandj:v:111:y:2009:i:2:p:369-386

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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

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Cited by:
  1. Oliver Lorz & Matthias Wrede, 2009. "Trade and Variety in a Model of Endogenous Product Differentiation," MAGKS Papers on Economics 200902, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  2. Eckel, Carsten & Irlacher, Michael, 2014. "Multi-Product Offshoring," Discussion Papers in Economics 21021, University of Munich, Department of Economics.
  3. Inga Heiland & Wilhelm Kohler, 2013. "Heterogeneous Workers, Trade, and Migration," CESifo Working Paper Series 4387, CESifo Group Munich.

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