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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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    More about this item

    Keywords

    eSS; innovation; trade policy; globalized world; globalization; competition; economic welfare; growth; equilibrium growth model; technology; leadership; market; markt leadership; defensive innovation motive; domestic innovation; international competition.;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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