Globalization and Strategic Research Investments
AbstractWe develop a general equilibrium model of international trade with heterogeneous firms, where countries can invest into basic research to improve their technological potential. These research investments tighten firm selection and raise the average productivity of firms in the market, thereby implying lower consumer prices and higher welfare. In an open economy, there is also a strategic investment motive since a higher technological potential gives domestic firms a competitive advantage in trade. Countries tend to over-invest due to this strategic motive. There are thus welfare gains from coordinating research investments. The over-investment problem turns to an under-investment problem if there are sufficiently strong cross-country spillovers of basic research investments.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5405.
Length: 29 pages
Date of creation: Dec 2010
Date of revision:
Publication status: published in: Research Policy, 2012, 41 (1), 13 - 23
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Other versions of this item:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-30 (All new papers)
- NEP-INO-2011-01-30 (Innovation)
- NEP-INT-2011-01-30 (International Trade)
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.:
- Agnès Bénassy-Quéré & Nicolas Gobalraja & Alain Trannoy, 2007. "Tax and public input competition," Economic Policy, CEPR & CES & MSH, vol. 22, pages 385-430, 04.
- O'Mahony, Mary & Vecchi, Michela, 2009. "R&D, knowledge spillovers and company productivity performance," Research Policy, Elsevier, vol. 38(1), pages 35-44, February.
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