R&D Policies, Trade and Process Innovation
AbstractWe set up a simple trade model with two countries hosting one firm each. The firms invest in cost-reducing R&D, and each government may grant R&D subsidies to the domestic firm. We show that it is optimal for a government to provide higher R&D subsidies the lower the level of trade costs, even if the firms are independent monopolies. If firms produce imperfect substitutes, policy competition may become so fierce that only one of the firms survives. International policy harmonization eliminates policy competition and ensures a symmetric outcome. However, it is shown that harmonization is not necessarily welfare-maximizing. The optimal coordinated policies may imply an asymmetric outcome with R&D subsidies to only one of the firms.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4784.
Date of creation: Dec 2004
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F15 - International Economics - - Trade - - - Economic Integration
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Pehr-Johan Norbäck, 2011.
"Subsidizing Away Exports? A Note on R&D-policy Towards Multinational Firms,"
Journal of Industry, Competition and Trade,
Springer, vol. 11(1), pages 25-42, March.
- Norbäck, Pehr-Johan, 2010. "Subsidizing Away Exports? A Note on R&D-policy towards Multinational Firms," Working Paper Series 832, Research Institute of Industrial Economics.
- Thanh Le & Cuong Le Van, 2014. "Trade Liberalization and Optimal R&D Policies with Process Innovation," Working Papers 2014-119, Department of Research, Ipag Business School.
- Giammario Impullitti, 2007. "International Schumpeterian Competition and Optimal R&D subsidies," Economics Working Papers ECO2007/55, European University Institute.
- Sebastian Braun, 2007.
"Trade Liberalisation, Process and Product Innovation, and Relative Skill Demand,"
SFB 649 Discussion Papers
SFB649DP2007-001, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Sebastian Braun, 2006. "Trade Liberalisation, Process and Product Innovation, and Relative Skill Demand," JEPS Working Papers 06-004, JEPS.
- Stephen Jui-Hsien Chou, 2013. "R&D Policy Competition with Process Innovation in a Multi-Product Duopoly," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 53-76, November.
- Long, Ngo Van & Raff, Horst & Stähler, Frank, 2011.
"Innovation and trade with heterogeneous firms,"
Journal of International Economics,
Elsevier, vol. 84(2), pages 149-159, July.
- Ngo Van Long & Horst Raff & Frank Stähler, 2008. "Innovation and Trade with Heterogeneous Firms," Kiel Working Papers 1430, Kiel Institute for the World Economy.
- Ngo Van Long & Horst Raff & Frank Stähler, 2009. "Innovation and Trade with Heterogeneous Firms," CESifo Working Paper Series 2796, CESifo Group Munich.
- Leahy, Dermot & Neary, J Peter, 2010.
"Oligopoly and Trade,"
CEPR Discussion Papers
8172, C.E.P.R. Discussion Papers.
- Dermot Leahy & J. Peter Neary, 2010. "Oligopoly And Trade," Economics, Finance and Accounting Department Working Paper Series n215-10.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
- Peter Neary & Dermot Leahy, 2010. "Oligopoly and Trade," Economics Series Working Papers 517, University of Oxford, Department of Economics.
- Carlo Altomonte & Tommaso Aquilante & Gábor Békés & Gianmarco I. P. Ottaviano, 2014.
"Internationalization and Innovation of Firms: Evidence and Policy,"
CEP Special Papers
032, Centre for Economic Performance, LSE.
- Carlo Altomonte & Tommaso Aquilante & Gábor Békés & Gianmarco I.P. Ottaviano, 2013. "Internationalization and innovation of firms: evidence and policy," Economic Policy, CEPR & CES & MSH, vol. 28(76), pages 663-700, October.
- Leahy, Dermot & Neary, J Peter, 2007.
"Multilateral Subsidy Games,"
CEPR Discussion Papers
6479, C.E.P.R. Discussion Papers.
- Stähler, Frank & Raff, Horst & Long, Ngo Van, 2007.
"The Effects of Trade Liberalization on Productivity and Welfare: The Role of Firm Heterogeneity, R&D and Market Structure,"
Economics Working Papers
2007,20, Christian-Albrechts-University of Kiel, Department of Economics.
- Ngo Van Long & Horst Raff & Frank Staehler, 2007. "The Effects of Trade Liberalization on Productivity and Welfare: The Role of Firm Heterogeneity, R&D and Market Structure," Working Papers 0710, University of Otago, Department of Economics, revised Jun 2007.
- Douhan, Robin & Norbäck, Pehr-Johan & Persson, Lars, 2009.
"Entrepreneurial Innovations, Entrepreneurship Policy and Globalization,"
Working Paper Series
807, Research Institute of Industrial Economics, revised 23 Jul 2013.
- Douhan, Robin & Norbäck, Pehr-Johan & Persson, Lars, 2010. "Entrepreneurial Innovations, Entrepreneurship Policy and Globalization," CEPR Discussion Papers 7752, C.E.P.R. Discussion Papers.
- Takauchi, Kazuhiro, 2012. "International R&D Rivalry with a Shipping Firm," MPRA Paper 36843, University Library of Munich, Germany.
- Li, Changying & Maskus, Keith E., 2006. "The impact of parallel imports on investments in cost-reducing research and development," Journal of International Economics, Elsevier, vol. 68(2), pages 443-455, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.