Trade Policy in the Presence of Technology Licensing
AbstractThis paper reconsiders strategic trade policy when a high-cost and a low-cost firm belonging to different countries compete a la Cournot in a third country market and technology is transferable. Assuming technology is transferred via licensing, optimal trade policy is characterized. Apart from affecting product-market profits - which is standard in this literature - any subsidy or tax also affects the licensing decision and the surplus generated from licensing. Considering the effects of subsidy on profits, surplus and the subsidy bill, we find that both the governments would often opt for lower subsidy compared to the Brander-Spencer subsidy rate - the optimal subsidy rate in the absence of possibility of licensing. In fact, for a range of cost parameters, optimal policy for the government of the high-cost firm turns out to be a tax. Further, in contrast to the existing literature on strategic trade policy with asymmetric costs we find non-monotone relationship between optimal subsidy and cost-competitiveness of firms. In particular, we find that efficient firms might be taxed while relatively less efficient firms might be subsidized.
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 Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0592.
Date of creation: 01 Aug 2000
Date of revision:
Contact details of provider:
Phone: 1 212 998 3820
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
Other versions of this item:
- Arghya Ghosh & Souresh Saha, 2008. "Trade Policy in the Presence of Technology Licensing," Review of International Economics, Wiley Blackwell, vol. 16(1), pages 45-68, 02.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kyle Bagwell & Robert W. Staiger, 1989.
"The Sensitivity of Strategic and Corrective R&D Policy in Oligopolistic Industries,"
869, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Bagwell, Kyle & Staiger, Robert W., 1994. "The sensitivity of strategic and corrective R&D policy in oligopolistic industries," Journal of International Economics, Elsevier, vol. 36(1-2), pages 133-150, February.
- Robert W. Staiger & Kyle Bagwell, 1990. "The Sensitivity of Strategic and Corrective R&D Policy in Oligopolistic Industries," NBER Working Papers 3236, National Bureau of Economic Research, Inc.
- Kabiraj, Tarun & Marjit, Sugata, 1993. "International technology transfer under potential threat of entry : A Cournot-Nash framework," Journal of Development Economics, Elsevier, vol. 42(1), pages 75-88, October.
- Carmichael, Calum M., 1987. "The control of export credit subsidies and its welfare consequences," Journal of International Economics, Elsevier, vol. 23(1-2), pages 1-19, August.
- Maggi, Giovanni, 1996. "Strategic Trade Policies with Endogenous Mode of Competition," American Economic Review, American Economic Association, vol. 86(1), pages 237-58, March.
- Collie, David, 1991.
"Export subsidies and countervailing tariffs,"
Journal of International Economics,
Elsevier, vol. 31(3-4), pages 309-324, November.
- Collie, D., 1990. "Export Subsidies And Countervailing Tariffs," The Warwick Economics Research Paper Series (TWERPS) 353, University of Warwick, Department of Economics.
- Kamien, Morton I & Tauman, Yair, 1986. "Fees versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 471-91, August.
- Eaton, Jonathan & Grossman, Gene M, 1986.
"Optimal Trade and Industrial Policy under Oligopoly,"
The Quarterly Journal of Economics,
MIT Press, vol. 101(2), pages 383-406, May.
- Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
- Gallini, Nancy T, 1984. "Deterrence by Market Sharing: A Strategic Incentive for Licensing," American Economic Review, American Economic Association, vol. 74(5), pages 931-41, December.
- Leahy, Dermot & Neary, J Peter, 1999. "Learning by Doing, Precommitment and Infant-Industry Promotion," Review of Economic Studies, Wiley Blackwell, vol. 66(2), pages 447-74, April.
- ISHIKAWA Jota & OKUBO Toshihiro, 2013. "Trade and Industrial Policy Subtleties with International Licensing," Discussion papers 13050, Research Institute of Economy, Trade and Industry (RIETI).
- Aoki, Shuhei, 2011.
"A Model of Technology Transfer in Japan's Rapid Economic Growth Period,"
IIR Working Paper
11-05, Institute of Innovation Research, Hitotsubashi University.
- Aoki, Shuhei, 2011. "A Model of Technology Transfer in Japan's Rapid Economic Growth Period," MPRA Paper 29235, University Library of Munich, Germany.
- Poddar, Sougata & Bouguezzi, Fehmi, 2011. "Patent licensing in spatial competition: Does pre-innovation cost asymmetry matter?," MPRA Paper 32764, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If references are entirely missing, you can add them using this form.