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A gain from trade: more research, less obstruction

Author

Listed:
  • Thomas J. Holmes
  • James A. Schmitz

Abstract

There is an old wisdom that reductions in tariffs force changes on producers that lead to costless, or nearly so, increases in productivity. We construct a technology-ladder model that captures this wisdom. As in other technology-ladder models, time spent in research helps propel an industry up a technology-ladder. In contrast to the literature, we include another activity that plays a role in determining an industry's position on the technology-ladder: attempts to obstruct the research program of rivals (through regulations, for example). In this world, reductions in tariffs between countries lead producers to spend more time in research and less in obstruction of rivals.

Suggested Citation

  • Thomas J. Holmes & James A. Schmitz, 1998. "A gain from trade: more research, less obstruction," Staff Report 245, Federal Reserve Bank of Minneapolis.
  • Handle: RePEc:fip:fedmsr:245
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    Citations

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    Cited by:

    1. Klaus Desmet & Stephen L. Parente, 2006. "Market Size, Trade, and the Resistance to the Adoption of Better Technology," 2006 Meeting Papers 264, Society for Economic Dynamics.
    2. Tse, Chung Yi, 2000. "Monopoly, human capital accumulation and development," Journal of Development Economics, Elsevier, vol. 61(1), pages 137-174, February.

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