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Innovation and trade policy coordination: the role of firm heterogeneity

  • Navas, Antonio

    ()

    (Department of Economics)

  • Sala, Davide

    ()

    (Department of Business and Economics)

Recent studies have concluded that R&D grants can induce firms to export and that exporting and innovating can be complementary activities at the firm level. Yet the trade literature has paid little attention to the scope of innovation policy as a stimulus to both trade and innovation. To investigate this question we rely on a general work-horse model of trade and firm heterogeneity with firm investments in R&D activities. The multiplicity of equilibria together with the interplay of innovation and trade policies uncover novel results. In particular, we show that the effects of either policy depend on the degree of protectionism in a country. Therefore, countries can respond differently to the same policy, and similarly to different policies. In such a context, different governments may face different degrees of freedom regarding how to achieve a given target. This finding leads us to discuss the issue of policy coordination.

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File URL: http://static.sdu.dk/mediafiles//7/8/9/%7B789485EC-136B-49CE-A436-5ECA73F9BF99%7Ddpbe18_2013_.pdf
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Paper provided by Department of Business and Economics, University of Southern Denmark in its series Discussion Papers of Business and Economics with number 18/2013.

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Length: 37 pages
Date of creation: 04 Nov 2013
Date of revision:
Handle: RePEc:hhs:sdueko:2013_018
Contact details of provider: Postal: Department of Business and Economics, University of Southern Denmark, Campusvej 55, DK-5230 Odense M, Denmark
Phone: 65 50 32 33
Fax: 65 50 32 37
Web page: http://www.sdu.dk/ivoe
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  1. Holger Görg & Michael Henry & Eric Strobl, 2008. "Grant Support and Exporting Activity," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 168-174, February.
  2. Gregory Corcos & Massimo Del Gatto & Giordano Mion & Gianmarco I.P. Ottaviano, 2009. "Productivity and Firm Selection: Quantifying the "New" Gains from Trade," KITeS Working Papers 002, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Mar 2009.
  3. 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.
  4. Osamu Onodera, 2008. "Trade and Innovation Project: A Synthesis Paper," OECD Trade Policy Papers 72, OECD Publishing.
  5. Peter Gustafsson & Paul Segerstrom, 2010. "Trade Liberalization and Productivity Growth," Review of International Economics, Wiley Blackwell, vol. 18(2), pages 207-228, 05.
  6. Diego Comin & Bart Hobijn, 2007. "Implementing Technology," NBER Working Papers 12886, National Bureau of Economic Research, Inc.
  7. Antonio Navas-Ruiz & Davide Sala, 2007. "Technology Adoption and the Selection Effect of Trade," Economics Working Papers ECO2007/58, European University Institute.
  8. repec:dgr:uvatin:20040114 is not listed on IDEAS
  9. Catia Montagna, 1998. "Efficiency Gaps, Love of Variety and International Trade," Dundee Discussion Papers in Economics 090, Economic Studies, University of Dundee.
  10. Bartelsman, Eric & Haltiwanger, John C. & Scarpetta, Stefano, 2004. "Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries," IZA Discussion Papers 1374, Institute for the Study of Labor (IZA).
  11. repec:dgr:uvatin:2004114 is not listed on IDEAS
  12. Gu, Wulong & Baldwin, John R., 2004. "Innovation, Survival and Performance of Canadian Manufacturing Plants," Economic Analysis (EA) Research Paper Series 2004022e, Statistics Canada, Analytical Studies Branch.
  13. Ledezma, Ivan & Bas, Maria, 2010. "Trade Integration and Within-Plant Productivity Evolution in Chile," Economics Papers from University Paris Dauphine 123456789/6910, Paris Dauphine University.
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