R&D, Market Structure and Trade: A General Equilibrium Analysis
That many industries exhibit highly concentrated market structures, even at the global level, calls for trade theoretic analyses which can accommodate this fact. We present a two-country, general equilibrium analysis in which high concentration levels can be sustained through the interaction between R&D and market structure, whilst emphasizing the effects of trade and industrial policy on wages and welfare. The world economy is characterized by asymmetric initial conditions and populations. If initial conditions are very different, freetrade reduces wages in a backward economy, relative to autarky. However, the advanced economy always achieves higher wages through trade. Welfare gains from trade arise when economies are either very similar or very different. In the intermediate case, when initial conditions are not too different, and the advanced economy’s population is not very large, the backward economy loses from trade, while the advanced economy gains. A compensation mechanism is feasible and would ensure that no nation loses from trade. The analysis provides formal criteria for the choice of trade partners and the formation of trade blocs. Moreover, industrial policy (an R&D subsidy) is shown to be neutral or ineffective, in the sense that it does not affect any real magnitudes.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +61 7 3365 6570
Fax: +61 7 3365 7299
Web page: http://www.uq.edu.au/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gene M. Grossman & Elhanan Helpman, 1992.
"Protection For Sale,"
NBER Working Papers
4149, National Bureau of Economic Research, Inc.
- Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
- Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
- Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
- Nelson, Richard R. & Pack, Howard, 1998.
"The Asian miracle and modern growth theory,"
Policy Research Working Paper Series
1881, The World Bank.
- Jagdish Bhagwati, 2002. "Trade and Poverty in the Poor Countries," American Economic Review, American Economic Association, vol. 92(2), pages 180-183, May.
- Satya P. Das & Subhadip Ghosh, 2003.
"Endogenous trading bloc formation in a North-South global economy,"
Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers
03-04, Indian Statistical Institute, New Delhi, India.
- Satya P. Das & Subhadip Ghosh, 2006. "Endogenous trading bloc formation in a North-South global economy," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 809-830, August.
- Markusen, James R., 1981. "Trade and the gains from trade with imperfect competition," Journal of International Economics, Elsevier, vol. 11(4), pages 531-551, November.
- Roberts, John & Sonnenschein, Hugo, 1977.
"On the Foundations of the Theory of Monopolistic Competition,"
Econometric Society, vol. 45(1), pages 101-13, January.
- John Roberts & Hugo Sonnenschein, 1976. "On the Foundations of the Theory of Monopolistic Competition," Discussion Papers 169, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- ROBERTS, John & SONNENSCHEIN, Hugo, . "On the foundations of the theory of monopolistic competition," CORE Discussion Papers RP -296, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, vol. 51(5), pages 1469-83, September.
- Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
- Bohm Volker, 1994. "The Foundation of the Theory of Monopolistic Competition Revisited," Journal of Economic Theory, Elsevier, vol. 63(2), pages 208-218, August.
- Aghion, Philippe & Antras, Pol & Helpman, Elhanan, 2007.
"Negotiating free trade,"
Journal of International Economics,
Elsevier, vol. 73(1), pages 1-30, September.
- Philippe Aghion & Pol Antràs & Elhanan Helpman, 2004. "Negotiating Free Trade," NBER Working Papers 10721, National Bureau of Economic Research, Inc.
- Helpman, Elhanan & Antras, Pol & Aghion, Philippe, 2007. "Negotiating Free Trade," Scholarly Articles 3351239, Harvard University Department of Economics.
- Taiji Furusawa & Hideo Konishi, 2004.
"Free Trade Networks with Transfers,"
Boston College Working Papers in Economics
606, Boston College Department of Economics, revised 19 Jan 2005.
- Ruffin, Roy J., 2003. "Oligopoly and trade: what, how much, and for whom?," Journal of International Economics, Elsevier, vol. 60(2), pages 315-335, August.
- Jonathan Eaton & Gene M. Grossman, 1983.
"Optimal Trade and Industrial Policy Under Oligopoly,"
NBER Working Papers
1236, National Bureau of Economic Research, Inc.
- Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May.
- J Peter Neary, 2002. "The Road Less Travelled - Oligopoly and Competition Policy in General Equilibrium," Working Papers 200222, School Of Economics, University College Dublin.
- JASKOLD GABSZEWICZ, Jean & VIAL, Jean-Philippe, .
"Oligopoly "à la Cournot" in a general equilibrium analysis,"
CORE Discussion Papers RP
-106, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Jaskold Gabszewicz, Jean & Vial, Jean-Philippe, 1972. "Oligopoly "A la cournot" in a general equilibrium analysis," Journal of Economic Theory, Elsevier, vol. 4(3), pages 381-400, June.
- J. Jaskold Gabszewicz & Avner Shaked & John Sutton & J.F. Thisse, 1981. "Price Competition Among Differentiated Products: A Detailed Study of a Nash Equilibrium," STICERD - Theoretical Economics Paper Series 37, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
When requesting a correction, please mention this item's handle: RePEc:qld:uq2004:361. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SOE IT)
If references are entirely missing, you can add them using this form.