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The Effects of Trade Liberalization on Productivity and Welfare: The Role of Firm Heterogeneity, R&D and Market Structure Author info | Abstract | Publisher info | Download info | Related research | Statistics Stähler, Frank
Raff, Horst
Long, Ngo Van
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registered author(s):
This paper develops an oligopolistic model of international trade with heterogeneous firms and endogenous R&D to examine how trade liberalization affects firm and industry productivity, as well as social welfare. We identify four effects of trade liberalization on productivity: (i) a direct effect through changes in R&D investment; (ii) a scale effect due to changes in firm size; (iii) a selection effect due to inefficient firms leaving the market; and (iv) a market-share reallocation effect as efficient firms expand and inefficient firms reduce their output. We show how these effects operate in the short run when market structure is fixed, and in the long run when market structure is endogenous. Among the robust results that hold for any market structure are that trade liberalization (i) increases (decreases) aggregate R&D for low (high) trade costs; (ii) increases expected firm size if trade costs are high; and (iii) raises expected social welfare if trade costs are low. --
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Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number
2007,20.
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Date of creation: 2007Date of revision:
Handle: RePEc:zbw:cauewp:5686Contact details of provider: Web page: http://www.wiso.uni-kiel.de/econ/
For technical questions regarding this item, or to correct its listing, contact: (ZBW - German National Library for Economics).
Keywords: international trade ; firm heterogeneity ; R&D ; productivity ; market structure ; Other versions of this item:
Find related papers by JEL classification: F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F15 - International Economics - - Trade - - - Economic Integration
This paper has been announced in the following NEP Reports :
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"Distortions to Agricultural Incentives in Australia and New Zealand ,"
2007 Conference (51st), February 13-16, 2007, Queenstown, New Zealand
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