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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
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Handle: RePEc:cpr:ceprdp:6500
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  1. Matteo Bugamelli & Silvia Fabiani & Enrico Sette, 2010. "The pro-competitive effect of imports from China: an analysis of firm-level price data," Temi di discussione (Economic working papers) 737, Bank of Italy, Economic Research and International Relations Area.
  2. Marcela Eslava & John C. Haltiwanger & Adriana D. Kugler & Maurice Kugler, 2009. "Trade Reforms and Market Selection: Evidence from Manufacturing Plants in Colombia," NBER Working Papers 14935, National Bureau of Economic Research, Inc.
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  4. Peretto, Pietro F., 1999. "Cost reduction, entry, and the interdependence of market structure and economic growth," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 173-195, February.
  5. Antonio Navas-Ruiz & Davide Sala, 2007. "Technology Adoption and the Selection Effect of Trade," Economics Working Papers ECO2007/58, European University Institute.
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  7. Andrew B Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and productivity in international trade," Working Papers 00-08, Center for Economic Studies, U.S. Census Bureau.
  8. Rachel Griffith & Rupert Harrison & Helen Simpson, 2010. "Product Market Reform and Innovation in the EU," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 389-415, 06.
  9. 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.
  10. Andrew Atkeson & Ariel Burstein, 2010. "Innovation, firm dynamics, and international trade," Staff Report 444, Federal Reserve Bank of Minneapolis.
  11. 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.
  12. Devereux, Michael B & Lapham, Beverly J, 1994. "The Stability of Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 299-305, February.
  13. Peretto, Pietro F., 2000. "Endogenous market structure and the growth and welfare effects of economic integration," Working Papers 00-14, Duke University, Department of Economics.
  14. Nicholas Bloom & Mirko Draca & John Van Reenen, 2011. "Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity," NBER Working Papers 16717, National Bureau of Economic Research, Inc.
  15. Chaim Fershtman & Eitan Muller, 1983. "Capital Accumulation Games of Infinite Duration," Discussion Papers 553, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  16. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  17. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
  18. 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.
  19. Ottaviano, Gianmarco & Melitz, Marc, 2008. "Market Size, Trade, and Productivity," Scholarly Articles 3229096, Harvard University Department of Economics.
  20. Paula Bustos, 2009. "Trade Liberalization, Exports and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinean Firms," 2009 Meeting Papers 1029, Society for Economic Dynamics.
  21. Chen, Natalie & Imbs, Jean & Scott, Andrew, 2009. "The dynamics of trade and competition," Journal of International Economics, Elsevier, vol. 77(1), pages 50-62, February.
  22. Bernhofen, Daniel M., 1999. "Intra-industry trade and strategic interaction: Theory and evidence," Journal of International Economics, Elsevier, vol. 47(1), pages 225-244, February.
  23. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
  24. Alla Lileeva & Daniel Trefler, 2010. "Improved Access to Foreign Markets Raises Plant-Level Productivity... for Some Plants," The Quarterly Journal of Economics, MIT Press, vol. 125(3), pages 1051-1099, August.
  25. repec:cup:cbooks:9780521816632 is not listed on IDEAS
  26. Giammario Impullitti & Omar Licandro, 2010. "Trade, Firm selection, and innovation: the competition channel," UFAE and IAE Working Papers 841.10, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  27. Aghion, Philippe, et al, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Review of Economic Studies, Wiley Blackwell, vol. 68(3), pages 467-92, July.
  28. 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.
  29. 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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