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Trade Liberalization, Competition and Growth

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  • Licandro, Omar
  • Navas-Ruiz, Antonio

Abstract

The aim of this paper is to understand whether international trade may enhance innovation and growth through an increase in competition. We develop a two-country endogenous growth model, both countries producing the same set of goods, with firm specific R&D and a continuum of oligopolistic sectors under Cournot competition. Since countries produce the same set of goods, trade openness makes markets more competitive, reducing prices and raising the incentives to innovate. More general, a reduction on trade barriers enhances growth by reducing domestic firms market power.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6500.

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Date of creation: Sep 2007
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Handle: RePEc:cpr:ceprdp:6500

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Keywords: Competition and growth; R&D; Trade openness;

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References

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  2. Paula Bustos, 2011. "Trade Liberalization, Exports, and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinian Firms," American Economic Review, American Economic Association, vol. 101(1), pages 304-40, February.
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Citations

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Cited by:
  1. Baboo M. Nowbutsing & Sonalisingh Ramsohok, 2012. "The rise of China: a new fear of trade competition for Mauritius?," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 5(2), pages 91-106, June.
  2. Navas, Antonio, 2012. "Asymmetric trade liberalization, sector heterogeneity and Innovation," Working Papers in Economic Theory 2012/05, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
  3. Giammario Impullitti, 2008. "International Competition and U.S. R&D Subsidies: A Quantitative Welfare Analysis," Economic Reports 15-08, FEDEA.
  4. Giammario Impullitti & Omar Licandro, 2013. "Trade, firm selection, and innovation: the competition channel," Discussion Papers 13/04, University of Nottingham, School of Economics.
  5. 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.
  6. Antonio Navas Ruiz, 2013. "Asymmetric trade liberalisation, sector heterogeneity andinnovation," FIW Working Paper series 127, FIW.
  7. Stracca, Livio, 2013. "The rise of China and India: blessing or curse for the advanced countries?," Working Paper Series 1620, European Central Bank.
  8. Armando Garcia Pires, 2012. "International trade and competitiveness," Economic Theory, Springer, vol. 50(3), pages 727-763, August.
  9. Navas, Antonio, 2010. "La Apertura al Comercio Exterior y sus Efectos sobre la Productividad en Presencia de Diferencias Intersectoriales," Working Papers in Economic Theory 2010/04, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
  10. Antonio Navas Ruiz, 2012. "Asymmetric trade liberalization, sector heterogeneity and industry productivity growth," Working Papers. Serie AD 2012-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  11. Aldaba, Rafaelita M., 2014. "The Philippine Manufacturing Industry Roadmap: Agenda for New Industrial Policy, High Productivity Jobs, and Inclusive Growth," Discussion Papers DP 2014-32, Philippine Institute for Development Studies.

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