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Entry Liberalization, Export Subsidy and R&D

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  • Roy Chowdhury, Prabal

Abstract

We examine, in the context of less developed countries, the R&D behaviour of igopolistic firms who compete over R&D, as well as output levels. We also assume that the firms can sell in either of the two markets - the domestic, or the foreign. We show that entry liberalization, despite increasing the level of competitiveness, does not affect the level of R&D. An increase in export subsidy may, however, lead to an increase in domestic R&D. Both these results contradict the popular argument that the levels of domestic R&D is positively related to the level of domestic competitiveness. We also demonstrate that any foreign firm that may enter selects a level of R&D that is atleast as efficient as that selected by any domestic firm. Finally, we demonstrate that entry liberalization has a positive effect on exports, as well as aggregate output.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1532.

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Date of creation: Feb 2006
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Handle: RePEc:pra:mprapa:1532

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Keywords: Entry liberalization; export subsidy; R&D; competitiveness;

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  1. Ruffin, R J, 1971. "Cournot Oligopoly and Competitive Behaviour," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(116), pages 493-502, October.
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