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International Leapfrogging and Subsidies

Author

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  • Lutz, Stefan

Abstract

The recent extensive study of vertical product differentiation models has allowed for the analysis of international trade issues in the presence of country asymmetries in terms of product qualities, technology, costs, market size and income. In the presence of such asymmetries, national industries will either be market leaders or be lagging behind in the international marketplace in terms of their product qualities. The resulting asymmetry in profits creates powerful incentives for lagging industries as well as their national governments to reverse this situation to their advantage, i.e. to induce ‘leapfrogging’ in terms of product qualities. This paper presents an analysis of subsidies as a facilitating device for leapfrogging.

Suggested Citation

  • Lutz, Stefan, 1997. "International Leapfrogging and Subsidies," CEPR Discussion Papers 1606, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1606
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    More about this item

    Keywords

    Country Asymmetries; Leapfrogging; Oligopoly; Quality; Trade; Vertical Product Differentiation;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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