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Does input sector liberalization promote quality innovation and exports?

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  • Bandyopadhyay, Swapnendu
  • Acharyya, Rajat

Abstract

This paper examines the relationship between input sector liberalization and product quality innovation and export orientation by a LDC firm given the complementarity between high input quality and high product quality. We show that input sector liberalization per se may not induce quality innovation and outward orientation. In fact in some situations ceteris paribus input sector liberalization may increase the odds in favour of low quality production. We show that total output sector liberalization, or surprisingly, a suitable degree of output sector protection then is needed to be combined with input sector liberalization so that quality innovation is induced.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 15 (2006)
Issue (Month): 4 ()
Pages: 443-462

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Handle: RePEc:eee:reveco:v:15:y:2006:i:4:p:443-462

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Web page: http://www.elsevier.com/locate/inca/620165

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  1. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
  2. Herguera, Inigo & Kujal, Praveen & Petrakis, Emmanuel, 2002. "Tariffs, quality reversals and exit in vertically differentiated industries," Journal of International Economics, Elsevier, vol. 58(2), pages 467-492, December.
  3. Clemenz, Gerhard, 1990. "International R&D competition and trade policy," Journal of International Economics, Elsevier, vol. 28(1-2), pages 93-113, February.
  4. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
  5. Shang-Jin Wei, 1997. "Gradualism versus Big Bang: Speed and Sustainability of Reforms," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1234-47, November.
  6. Desai, Ashok V., 1980. "The origin and direction of industrial R&D in India," Research Policy, Elsevier, vol. 9(1), pages 74-96, January.
  7. Feenstra, Robert C, 1988. "Quality Change under Trade Restraints in Japanese Autos," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 131-46, February.
  8. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  9. Vandenbussche, Hylke & Wauthy, Xavier, 2001. "Inflicting injury through product quality: how European antidumping policy disadvantages European producers," European Journal of Political Economy, Elsevier, vol. 17(1), pages 101-116, March.
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Cited by:
  1. Acharyya, Rajat & Banerjee, Swapnendu, 2012. "On tariff and quality innovation in a market with discrete preferences," Economic Modelling, Elsevier, vol. 29(3), pages 917-925.
  2. Rajat Acharyya & Prabal Roy Chowdhury, 2006. "Innovation incentives in an intergrated marketed with vertical product differentiation," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 06-02, Indian Statistical Institute, New Delhi, India.
  3. Rajat Acharyya & Maria D.C. Garcia-Alonso, 2010. "Income Based Price Subsidies and Parallel Imports," Studies in Economics 1008, Department of Economics, University of Kent.

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