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International Leapfrogging and Subsidies

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Author Info
Lutz, Stefan

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Abstract

The recent extensive study of vertical product differentiation models has allowed for the analysis of international trade issues in the presence of country asymmetries in terms of product qualities, technology, costs, market size and income. In the presence of such asymmetries, national industries will either be market leaders or be lagging behind in the international marketplace in terms of their product qualities. The resulting asymmetry in profits creates powerful incentives for lagging industries as well as their national governments to reverse this situation to their advantage, i.e. to induce ‘leapfrogging’ in terms of product qualities. This paper presents an analysis of subsidies as a facilitating device for leapfrogging.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1606.

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Date of creation: Mar 1997
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Handle: RePEc:cpr:ceprdp:1606

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Related research
Keywords: Country Asymmetries; Leapfrogging; Oligopoly; Quality; Trade; Vertical Product Differentiation;

Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

Cited by:
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  1. Jaqueline Rothfels, 2000. "Environmental policy under product differentiation and asymmetric costs - Does Leapfrogging occur and is it worth it?," IWH Discussion Papers 124, Halle Institute for Economic Research. [Downloadable!]
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This page was last updated on 2009-12-21.

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