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Does input sector liberalization promote quality innovation and exports?

  • Bandyopadhyay, Swapnendu
  • Acharyya, Rajat

This paper examines the relationship between input sector liberalization and product quality innovation and export orientation by a LDC firm given the complementarity between high input quality and high product quality. We show that input sector liberalization per se may not induce quality innovation and outward orientation. In fact in some situations ceteris paribus input sector liberalization may increase the odds in favour of low quality production. We show that total output sector liberalization, or surprisingly, a suitable degree of output sector protection then is needed to be combined with input sector liberalization so that quality innovation is induced.

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Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 15 (2006)
Issue (Month): 4 ()
Pages: 443-462

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Handle: RePEc:eee:reveco:v:15:y:2006:i:4:p:443-462
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  1. Shang-Jin Wei, 1997. "Gradualism versus Big Bang: Speed and Sustainability of Reforms," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1234-47, November.
  2. Vandenbussche, Hylke & Wauthy, Xavier, 2001. "Inflicting injury through product quality: how European antidumping policy disadvantages European producers," European Journal of Political Economy, Elsevier, vol. 17(1), pages 101-116, March.
  3. Wolfgang Keller, 2001. "International Technology Diffusion," NBER Working Papers 8573, National Bureau of Economic Research, Inc.
  4. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
  5. Clemenz, Gerhard, 1990. "International R&D competition and trade policy," Journal of International Economics, Elsevier, vol. 28(1-2), pages 93-113, February.
  6. Desai, Ashok V., 1980. "The origin and direction of industrial R&D in India," Research Policy, Elsevier, vol. 9(1), pages 74-96, January.
  7. Robert C. Feenstra, 1988. "Quality Change Under Trade Restraints in Japanese Autos," The Quarterly Journal of Economics, Oxford University Press, vol. 103(1), pages 131-146.
  8. Herguera, Inigo & Kujal, Praveen & Petrakis, Emmanuel, 2002. "Tariffs, quality reversals and exit in vertically differentiated industries," Journal of International Economics, Elsevier, vol. 58(2), pages 467-492, December.
  9. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
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