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Trade Liberalisation, Process and Product Innovation, and Relative Skill Demand

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  • Sebastian Braun

Abstract

The interaction between trade liberalisation, product and process innovation, and relative skill demand is analysed in a model of international oligopoly. Lower trading barriers increase the degree of foreign competition. The competing enterprises respond by investing more aggressively in lowering marginal costs of production. Moreover, firms reduce the substitutability of their products through additional investment in product innovation. The paper also shows that the relative demand for skilled workers may increase as a result.

Suggested Citation

  • Sebastian Braun, 2007. "Trade Liberalisation, Process and Product Innovation, and Relative Skill Demand," SFB 649 Discussion Papers SFB649DP2007-001, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    • Handle: RePEc:hum:wpaper:sfb649dp2007-001
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    File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2007-001.pdf
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    References listed on IDEAS

    as
    1. J.Peter Neary, 2002. "Foreign Competition and Wage Inequality," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 680-693, November.
    2. Haaland, Jan I. & Kind, Hans Jarle, 2008. "R&D policies, trade and process innovation," Journal of International Economics, Elsevier, vol. 74(1), pages 170-187, January.
    3. Rosenkranz, Stephanie, 2003. "Simultaneous choice of process and product innovation when consumers have a preference for product variety," Journal of Economic Behavior & Organization, Elsevier, vol. 50(2), pages 183-201, February.
    4. Pia Weiss, 2003. "Adoption of Product and Process Innovations in Differentiated Markets: The Impact of Competition," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 23(3), pages 301-314, December.
    5. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Trends in U.S. Wage Inequality: Re-Assessing the Revisionists," NBER Working Papers 11627, National Bureau of Economic Research, Inc.
    6. Lin, Ping & Saggi, Kamal, 2002. "Product differentiation, process R&D, and the nature of market competition," European Economic Review, Elsevier, vol. 46(1), pages 201-211, January.
    7. Neary, J Peter, 2002. "Foreign Competition and Wage Inequality," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 680-693, November.
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    Cited by:

    1. Maria Rosa Battaggion & Piero Tedeschi, 2021. "How do demand and costs affect the nature of innovation?," Journal of Economics, Springer, vol. 133(3), pages 199-238, August.

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    More about this item

    Keywords

    Intra-industry Trade; Process Innovation; Product Innovation; Relative Skill Demand; Trade Liberalisation;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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