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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 two-country endogenous growth model, both countries producing the same set of goods, with firm speciffic R&D and a continuum of oligopolistic sectors under Cournot competition. Since countries produce the same setof 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://documentos.fedea.net/pubs/dt/2008/dt-2008-03.pdf
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Paper provided by FEDEA in its series Working Papers with number 2008-03.

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Date of creation: Jan 2008
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Handle: RePEc:fda:fdaddt:2008-03
Contact details of provider: Web page: http://www.fedea.net

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  1. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 295-316.
  2. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  3. 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.
  4. Ariel Burstein & Andrew Atkeson, 2009. "Innovation, Firm Dynamics, and International Trade," 2009 Meeting Papers 186, Society for Economic Dynamics.
  5. R. Cellini & L. Lambertini, 2004. "R&D Incentives and Market Structure: A Dynamic Analysis," Working Papers 497, Dipartimento Scienze Economiche, Universita' di Bologna.
  6. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
  7. 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.
  8. 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.
  9. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  10. 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.
  11. Michael B. Devereux & Beverly J. Lapham, 1993. "The Stability of Economics Integration and Endogenous Growth," Working Papers 878, Queen's University, Department of Economics.
  12. 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.
  13. 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.
  14. 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.
  15. Antonio Navas-Ruiz & Davide Sala, 2007. "Technology Adoption and the Selection Effect of Trade," Economics Working Papers ECO2007/58, European University Institute.
  16. Fershtman, Chaim & Muller, Eitan, 1984. "Capital accumulation games of infinite duration," Journal of Economic Theory, Elsevier, vol. 33(2), pages 322-339, August.
  17. 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).
  18. repec:cup:cbooks:9780521816632 is not listed on IDEAS
  19. Giammario Impullitti & Omar Licandro, 2010. "Trade, Firm Selection, and Innovation: the Competition Channel," Working Papers 495, Barcelona Graduate School of Economics.
  20. Brander, James A., 1981. "Intra-industry trade in identical commodities," Journal of International Economics, Elsevier, vol. 11(1), pages 1-14, February.
  21. 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.
  22. 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.
  23. Natalie Chen & Jean Imbs & Andrew Scott, 2006. "The dynamics of trade and competition," Working Paper Research 91, National Bank of Belgium.
  24. Nicholas Bloom & Mirko Draca & John Van Reenen, 2011. "Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity," CEP Discussion Papers dp1000, Centre for Economic Performance, LSE.
  25. 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.
  26. 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.
  27. 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.
  28. 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.
  29. repec:cup:cbooks:9780521016919 is not listed on IDEAS
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