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Spillovers from Foreign Exporters

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Abstract

We develop a general equilibrium model of international trade with heterogeneous firms that accounts for productivity spillovers transmitted by foreign exporters. Everything else equal, stronger spillovers increase welfare. We embed the model framework into a trade policy scenario where countries strategically set inter-country variable trade costs for the trading partner. In the strategic Nash-equilibrium policy, governments trade-off welfare gains from protectionism and those which are due to spillovers from foreign exporters. The equilibrium degree of protectionism is decreasing in the strength of the spillover. Policy coordination induces welfare gains, but these gains can be humpshaped in the spillover strength.

Suggested Citation

  • Bohnstedt, Anna, 2013. "Spillovers from Foreign Exporters," Ruhr Economic Papers 400, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:400
    DOI: 10.4419/86788455
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    More about this item

    Keywords

    spillovers; heterogeneous firms;

    JEL classification:

    • F1 - International Economics - - Trade
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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