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Credibility of Protection and Incentives to Innovate

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  • Miyagiwa, Kaz
  • Ohno, Yuka

Abstract

In recent trade policy debates it is often argued that temporary protection stimulates innovation. This paper shows that the validity of the argument depends on the perceived credibility of protection policy. If it is suspected that temporary protection will be removed early should innovation occur before its terminal date, the protected firm invests less in R&D than it does under free trade. If it is expected that protection will be extended should no innovation have occurred by its terminal date, investment falls below the free-trade level, and eventually to zero, as the terminal date is approached. Copyright 1999 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 40 (1999)
Issue (Month): 1 (February)
Pages: 143-63

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Handle: RePEc:ier:iecrev:v:40:y:1999:i:1:p:143-63

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Cited by:
  1. Miravete, Eugenio J., 2003. "Time-consistent protection with learning by doing," European Economic Review, Elsevier, vol. 47(5), pages 761-790, October.
  2. Benjamin H. Liebman & Kara M. Reynolds, 2009. "Innovation Through Protection: Does Safeguard Protection Increase Investment in R and D?," Working Papers 2009-18, American University, Department of Economics.
  3. Ederington, Josh & McCalman, Phillip, 2009. "Infant Industry Protection and Industrial Dynamics," MPRA Paper 22361, University Library of Munich, Germany.
  4. KITANO Taiju & OHASHI Hiroshi, 2007. "Did U.S. Safeguard Resuscitate Harley Davidson in the 1980s?," Discussion papers 07026, Research Institute of Economy, Trade and Industry (RIETI).
  5. Meredith Crowley, 2006. "Why are safeguards needed in a trade agreement?," Working Paper Series WP-06-06, Federal Reserve Bank of Chicago.
  6. Laura Rovegno, 2013. "Trade protection and market power: evidence from US antidumping and countervailing duties," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 149(3), pages 443-476, September.
  7. Meredith A. Crowley, 2002. "Do safeguard tariffs and antidumping duties open or close technology gaps?," Working Paper Series WP-02-13, Federal Reserve Bank of Chicago.
  8. Traca, Daniel A., 2002. "Imports as competitive discipline: the role of the productivity gap," Journal of Development Economics, Elsevier, vol. 69(1), pages 1-21, October.
  9. Meredith A. Crowley, 2003. "An introduction to the WTO and GATT," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 42-57.
  10. Saggi, Kamal, 2000. "Trade, foreign direct investment, and international technology transfer : a survey," Policy Research Working Paper Series 2349, The World Bank.
  11. E. Young Song, 2000. "Temporary Protection and Technology Choice Under the Learning Curve," Econometric Society World Congress 2000 Contributed Papers 0248, Econometric Society.

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