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North-South trade liberalization and factor reallocations between manufacturing and R&D

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  • Cristóbal Campoamor, Adolfo

Abstract

This paper presents a dynamic North-South model of the product cycle, with the aim of assessing the welfare effects of liberalizing trade and strengthening intellectual property rights. We show that the conclusions depend strongly on the relative size of the Southern market and the resulting pricing strategies applied by Southern firms. If the Southern market is small enough relative to that of the North, trade liberalization leads to positive level effects on welfare for both country blocks, although it has neither short- nor long-term bearing on growth and technological diffusion. However, when the size of the Southern economy is similar to or larger than that of the North, gradual trade liberalization may induce factor reallocations between R&D and manufacturing production that could be detrimental to growth and welfare.

Suggested Citation

  • Cristóbal Campoamor, Adolfo, 2021. "North-South trade liberalization and factor reallocations between manufacturing and R&D," Economic Modelling, Elsevier, vol. 96(C), pages 277-294.
    • Handle: RePEc:eee:ecmode:v:96:y:2021:i:c:p:277-294
    DOI: 10.1016/j.econmod.2021.01.008
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    More about this item

    Keywords

    Product variety; Innovation; Imitation; Transitional dynamics; Intellectual property rights; Bilateral trade liberalization;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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