Strategic Investment and the Gains from Trade
AbstractThis paper examines how trade liberalisation affects innovation, profits and welfare when firms are engaging in strategic R&D investment. We show that there are multiple equilibria including an autarky equilibrium for a range of high but non-prohibitive trade costs. At lower trade costs, only the trading equilibrium survives. Welfare is U-shaped in the trade costs, so a small fall in trade costs can be welfare reducing. However we find a threshold level of the effectiveness of investment above which trade is always welfare superior to autarky
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Bibliographic InfoPaper provided by Department of Economics, Finance and Accounting, National University of Ireland - Maynooth in its series Economics, Finance and Accounting Department Working Paper Series with number n216-11.pdf.
Length: 23 pages
Date of creation: 2011
Date of revision:
Reciprocal Markets; Strategic R&D Investment; Trade Costs; Trade Liberalisation; Effectiveness of R&D.;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F15 - International Economics - - Trade - - - Economic Integration
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-19 (All new papers)
- NEP-INO-2011-03-19 (Innovation)
- NEP-INT-2011-03-19 (International Trade)
- NEP-TID-2011-03-19 (Technology & Industrial Dynamics)
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.:
- Long, Ngo Van & Raff, Horst & Stähler, Frank, 2011.
"Innovation and trade with heterogeneous firms,"
Journal of International Economics,
Elsevier, vol. 84(2), pages 149-159, July.
- Ngo Van Long & Horst Raff & Frank Stähler, 2009. "Innovation and Trade with Heterogeneous Firms," CESifo Working Paper Series 2796, CESifo Group Munich.
- Ngo Van Long & Horst Raff & Frank Stähler, 2008. "Innovation and Trade with Heterogeneous Firms," Kiel Working Papers 1430, Kiel Institute for the World Economy.
- Takauchi, Kazuhiro, 2012. "International R&D Rivalry with a Shipping Firm," MPRA Paper 36843, University Library of Munich, Germany.
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