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The Interaction Between Technology Adoption and Trade When Firms are Heterogeneous

  • Bulent Unel

This paper develops a monopolistic competition model with heterogeneous firms to study the interaction between technology adoption and trade in a world of two countries facing different technology adoption costs. It shows that a reduction in the technology adoption cost in one country increases the productivity, induces more firms to adopt advanced technology, and improves welfare in this country, while decreasing the pro- ductivity, inducing more firms to switch back to old technology, and reducing welfare in the other country. Furthermore, although a reduction in transport costs always makes the country with lower adoption cost better off, it can hurt the other country.

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File URL: http://hdl.handle.net/10.1111/roie.12071
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Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 21 (2013)
Issue (Month): 4 (09)
Pages: 797-808

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Handle: RePEc:bla:reviec:v:21:y:2013:i:4:p:797-808
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