Welfare gains by reducing transaction costs: Linking trade and innovation policy
AbstractSpecialisation and trade are major sources of productivity increases, and therefore of welfare gains. With reference to the Netherlands this paper discusses how (international) fragmentation of production and outsourcing may enhance productivity. In order to promote further specialisation and trade, innovations which lead to lower transaction costs - trade innovations - are needed. When trading countries, which are likely to have a comparative advantage in reducing transaction costs, focus on the coordination function in the production chain, they are able to internalize part of the welfare gains from increased trade. Infrastructure and knowledge investments that reduce transaction costs, the so called trade capital, partly have the character of a public good. Moreover, trade innovations bring about positive externalities, which is another reason for government intervention and for linking trade and innovation policy. From this perspective the paper gives some policy recommendations.
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Bibliographic InfoPaper provided by VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics in its series Serie Research Memoranda with number 0012.
Date of creation: 2006
Date of revision:
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Web page: http://www.feweb.vu.nl
Outsourcing; transaction costs; Knowledge spill-overs; Trade policy; Innovations; Coordination function;
Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-28 (All new papers)
- NEP-INT-2006-07-28 (International Trade)
- NEP-LAW-2006-07-28 (Law & Economics)
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