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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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Citations

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Cited by:
  1. Stracca, Livio, 2013. "The rise of China and India: blessing or curse for the advanced countries?," Working Paper Series 1620, European Central Bank.
  2. Giammario Impullitti & Omar Licandro, 2010. "Trade, Firm Selection, and Innovation: the Competition Channel," Working Papers 495, Barcelona Graduate School of Economics.
  3. 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).
  4. Svetlana B. Avdasheva & Dina V. Tsytsulina, 2014. "The Effects Of Competition Policy: Merger Approval, Entry Barrier Removal, Antitrust Enforcement Compared," HSE Working papers WP BRP 34/FE/2014, National Research University Higher School of Economics.
  5. Ngo Van Long & Horst Raff & Frank Stähler, 2009. "Innovation and Trade with Heterogeneous Firms," CESifo Working Paper Series 2796, CESifo Group Munich.
  6. Antonio Navas Ruiz, 2013. "Asymmetric trade liberalisation, sector heterogeneity andinnovation," FIW Working Paper series 127, FIW.
  7. 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.
  8. Giammario Impullitti, 2008. "International Competition and U.S. R&D Subsidies: A Quantitative Welfare Analysis," Economics Working Papers ECO2008/11, European University Institute.
  9. 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.
  10. 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).
  11. 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).
  12. Armando Garcia Pires, 2012. "International trade and competitiveness," Economic Theory, Springer, vol. 50(3), pages 727-763, August.

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