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Technological Progress Through Trade Liberalization in Transition Countries

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  • Yener Kandogan

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    Abstract

    Trade liberalization increases competitive pressures on domestic firms, and thus creates incentives for reducing costs of production through technological progress. Through this channel, backward countries get a chance to narrow their technological gap with more advanced countries. In this paper, the case of transition countries is analyzed. A simple model of oligopolistic firms’ strategic decision on R&D is developed to motivate the empirical analysis. The results suggest that some initial conditions such as size of the initial technological gap, and initial openness to international trade, as well as the stage of the market reforms, in particular, rate of liberalization and structure of domestic markets are important factors in narrowing the technology gap.

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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp567.pdf
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    Bibliographic Info

    Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2003-567.

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    Length: 34 pages
    Date of creation: 26 Jun 2003
    Date of revision:
    Handle: RePEc:wdi:papers:2003-567

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    Keywords: Technology gap; Trade Liberalization; Transition; Market reforms;

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    1. Daniels, Peter, 1999. "Economic Gains from Technology-Intensive Trade: An Empirical Assessment," Cambridge Journal of Economics, Oxford University Press, vol. 23(4), pages 427-47, July.
    2. Grossman, Gene M & Helpman, Elhanan, 1990. "Comparative Advantage and Long-run Growth," American Economic Review, American Economic Association, vol. 80(4), pages 796-815, September.
    3. Dani Rodrik, 1988. "Closing the Technology Gap: Does Trade Liberalization Really Help?," NBER Working Papers 2654, National Bureau of Economic Research, Inc.
    4. Bhagwati, Jagdish N, 1988. "Export-Promoting Trade Strategy: Issues and Evidence," World Bank Research Observer, World Bank Group, vol. 3(1), pages 27-57, January.
    5. Oleg Bogomolov, 1987. "The Socialist Countries at a Critical Stage in World Economic Development," Problems of Economic Transition, M.E. Sharpe, Inc., vol. 30(8), pages 38-54, December.
    6. Gans, J.S., 1995. "Industrialisation with a Menu of Technology: Appropriate Technologies and the "Big Push"," Papers 95/36, New South Wales - School of Economics.
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