Endogenous Sunk Costs, Flexible Manufacturing and the Productivity Effects of International Trade
AbstractThe 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 InfoArticle provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.
Volume (Year): 111 (2009)
Issue (Month): 2 (06)
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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442
Other versions of this item:
- Eckel, Carsten, 2009. "Endogenous sunk costs, flexible manufacturing and the productivity effects of international trade," Munich Reprints in Economics 20532, University of Munich, Department of Economics.
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- 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).
- Lorz Oliver & Wrede Matthias, 2009. "Trade and Variety in a Model of Endogenous Product Differentiation," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-14, November.
- Eckel, Carsten & Irlacher, Michael, 2014. "Multi-Product Offshoring," Discussion Papers in Economics 21021, University of Munich, Department of Economics.
- Inga Heiland & Wilhelm Kohler, 2013. "Heterogeneous Workers, Trade, and Migration," CESifo Working Paper Series 4387, CESifo Group Munich.
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