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Innovation and Trade Policy in a Globalized World

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  • Ufuk Akcigit

    ()

  • Sina T. Ates

    ()

  • Giammario Impullitti

    ()

Abstract

How do import tariffs and R&D subsidies help domestic firms compete globally? How do these policies affect aggregate growth and economic welfare? To answer these questions, the paper builds a dynamic general equilibrium growth model where firm innovation endogenously determines the dynamics of technology, and, therefore, market leadership and trade flows, in a world with two large open economies at different stages of development. Firms’ R&D decisions are driven by (i) the defensive innovation motive, (ii) the expansionary innovation motive, and (iii) technology spillovers. The theoretical investigation illustrates that, statically, globalization (defined as reduced trade barriers) has ambiguous effects on welfare, while, dynamically, intensified globalization boosts domestic innovation through induced international competition.

Suggested Citation

  • Ufuk Akcigit & Sina T. Ates & Giammario Impullitti, 2018. "Innovation and Trade Policy in a Globalized World," Working Papers id:12756, eSocialSciences.
  • Handle: RePEc:ess:wpaper:id:12756
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    Cited by:

    1. Philippe Aghion, Antonin Bergeaud, Matthieu Lequien, Marc J. Melitz, 2018. "The Impact of Exports on Innovation: Theory and Evidence," Working papers 678, Banque de France.

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