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R&D in trade networks: The role of asymmetry

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  • Teteryatnikova, Mariya

Abstract

This paper argues that asymmetry in countries’ trade exposure is an important determinant of firms’ R&D, productivity and countries’ welfare. We model a choice of R&D in a given trade network focusing on asymmetric hub-and-spoke networks and symmetric networks. We find that R&D, productivity and total surplus are highest in a hub economy and lowest in a spoke, while intermediate levels are exhibited by countries in a symmetric network. Thus, regional/preferential trade agreements, resulting in asymmetric trade networks, benefit hubs but harm spokes. By contrast, multilateral trade agreements, resulting in a complete network, generate equal R&D and welfare benefits for all countries.

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  • Teteryatnikova, Mariya, 2018. "R&D in trade networks: The role of asymmetry," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 307-350.
  • Handle: RePEc:eee:indorg:v:61:y:2018:i:c:p:307-350
    DOI: 10.1016/j.ijindorg.2018.07.010
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    More about this item

    Keywords

    Trade network; Hub-and-spoke network; Asymmetry; R&D; Oligopolistic competition; Trade agreements;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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