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Trade Liberalization, Competition and Growth

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Author Info
Omar Licandro
Antonio Navas-Ruiz

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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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File URL: http://cadmus.iue.it/dspace/bitstream/1814/7106/1/ECO-2007-19.pdf
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Paper provided by European University Institute in its series Economics Working Papers with number ECO2007/19.

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Date of creation: 2007
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Handle: RePEc:eui:euiwps:eco2007/19

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Related research
Keywords: Trade openess competition and growth R&D

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
O3 - Economic Development, Technological Change, and Growth - - Technological Change

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References listed on IDEAS
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.:
  1. Winfried Koeniger & Omar Licandro, 2006. "On the Use of Substitutability as a Measure of Competition," Topics in Macroeconomics, Berkeley Electronic Press, vol. 6(1), pages 1283-1283. [Downloadable!] (restricted)
  2. Fershtman, Chaim & Muller, Eitan, 1984. "Capital accumulation games of infinite duration," Journal of Economic Theory, Elsevier, vol. 33(2), pages 322-339, August. [Downloadable!] (restricted)
  3. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Devereux, Michael B & Lapham, Beverly J, 1994. "The Stability of Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 299-305, February. [Downloadable!] (restricted)
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  5. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Giammario Impullitti, 2008. "International Competition and U.S. R&D Subsidies: A Quantitative Welfare Analysis," Economics Working Papers ECO2008/11, European University Institute. [Downloadable!]
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