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Is Free Trade Good for Endogenous Growth?: Monopolistic and Duopolistic Competition

Author

Listed:
  • Younggwan Goo

    (Samsung Research Institute of Finance)

  • Seong-Hoon Lee

    (Center for Economic Studies, Bureau of the Census)

Abstract

This paper examines the role of market power and market structure in determining the endogenous economic growth. Contrary to free trade under monopolistic competition, free trade under duopolistic competition by opening up the economy increases competition in intermediate input markets through the higher elasticity of substitution between inputs after trade. this reduces the incentive to invest in new technology development and thus free trade would be detrimental to endogenous growth in such an economy. The results of this paper suggest that in an intra-industry trade, policy makers when making decisions on opening up markets need to consider market structures after trade and thereby combine open markets with interventionist industrial policies.

Suggested Citation

  • Younggwan Goo & Seong-Hoon Lee, 2003. "Is Free Trade Good for Endogenous Growth?: Monopolistic and Duopolistic Competition," Korean Economic Review, Korean Economic Association, vol. 19, pages 191-209.
    • Handle: RePEc:kea:keappr:ker-200306-19-1-09
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    More about this item

    Keywords

    Endogenous growth; Monopolistic Competition; and Duopolisitic Competition;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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