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Trade liberalization, competition and growth

  • Omar Licandro

    ()

  • Antonio Navas-Ruiz

    ()

The aim of this paper is to understand whether international trade may enhance innovation and growth through an increase in competition. We develop a twocountry 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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File URL: http://e-archivo.uc3m.es/bitstream/10016/949/1/we076536.pdf
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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we076536.

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Date of creation: Sep 2007
Date of revision:
Handle: RePEc:cte:werepe:we076536
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  1. 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.
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  7. 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.
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  9. 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.
  10. 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.
  11. Antonio Navas-Ruiz & Davide Sala, 2007. "Technology adoption and the selection effect of trade," Economics Working Papers we076737, Universidad Carlos III, Departamento de Economía.
  12. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
  13. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," NBER Working Papers 11393, National Bureau of Economic Research, Inc.
  14. Giammario Impullitti & Omar Licandro, 2013. "Trade, firm selection, and innovation: the competition channel," Discussion Papers 13/04, University of Nottingham, School of Economics.
  15. repec:cup:cbooks:9780521816632 is not listed on IDEAS
  16. 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.
  17. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  18. Natalie Chen & Jean Imbs & Andrew Scott, 2006. "The dynamics of trade and competition," Working Paper Research 91, National Bank of Belgium.
  19. 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.
  20. Paula Bustos, 2009. "Trade liberalization, exports and technology upgrading: Evidence on the impact of MERCOSUR on Argentinean firms," Economics Working Papers 1173, Department of Economics and Business, Universitat Pompeu Fabra.
  21. 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.
  22. repec:cup:cbooks:9780521016919 is not listed on IDEAS
  23. 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.
  24. 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.
  25. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  26. 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.
  27. 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.
  28. 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.
  29. 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.
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