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Trade Liberalization, Competition and Growth

  • Licandro, Omar
  • Navas-Ruiz, Antonio

The aim of this paper is to understand whether international trade may enhance innovation and growth through an increase in competition. We develop a two-country endogenous growth model, both countries producing the same set of goods, with firm specific R&D and a continuum of oligopolistic sectors under Cournot competition. Since countries produce the same set of goods, trade openness makes markets more competitive, reducing prices and raising the incentives to innovate. More general, a reduction on trade barriers enhances growth by reducing domestic firms market power.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6500.

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Date of creation: Sep 2007
Date of revision:
Handle: RePEc:cpr:ceprdp:6500
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  1. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919.
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  18. Eslava, Marcela & Haltiwanger, John C. & Kugler, Adriana & Kugler, Maurice, 2009. "Trade Reforms and Market Selection: Evidence from Manufacturing Plants in Colombia," IZA Discussion Papers 4256, Institute for the Study of Labor (IZA).
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  20. repec:oup:restud:v:68:y:2001:i:3:p:467-92 is not listed on IDEAS
  21. R. Cellini & L. Lambertini, 2004. "R&D Incentives and Market Structure: A Dynamic Analysis," Working Papers 497, Dipartimento Scienze Economiche, Universita' di Bologna.
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  23. Alla Lileeva & Daniel Trefler, 2007. "Improved Access to Foreign Markets Raises Plant-Level Productivity ... for Some Plants," NBER Working Papers 13297, National Bureau of Economic Research, Inc.
  24. Harris, Christopher & Howitt, Peter & Vickers, John & Aghion, Philippe, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Scholarly Articles 12375013, Harvard University Department of Economics.
  25. Rachel Griffith & Rupert Harrison & Helen Simpson, 2006. "The link between product market reform, innovation and EU macroeconomic performance," European Economy - Economic Papers 243, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  26. repec:tpr:qjecon:v:125:y:2010:i:3:p:1051-1099 is not listed on IDEAS
  27. Koeniger Winfried & Licandro Omar, 2006. "On the Use of Substitutability as a Measure of Competition," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-9, March.
  28. Josh Ederington & Phillip McCalman, 2007. "The Impact of Trade Liberalization on Productivity Within and Across Industries: Theory and Evidence," Monash Economics Working Papers 24-07, Monash University, Department of Economics.
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  30. repec:oup:qjecon:v:106:y:1991:i:2:p:531-55 is not listed on IDEAS
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