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Technological Progress Through Trade Liberalization in Transition Countries

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  • Yener Kandogan

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Abstract

Trade liberalization increases competitive pressures on domestic firms, and thus creates incentives for reducing costs of production through technological progress. Through this channel, backward countries get a chance to narrow their technological gap with more advanced countries. In this paper, the case of transition countries is analyzed. A simple model of oligopolistic firms??? strategic decision on R&D is developed to motivate the empirical analysis. The results suggest that some initial conditions such as size of the initial technological gap, and initial openness to international trade, as well as the stage of the market reforms, in particular, rate of liberalization and structure of domestic markets are important factors in narrowing the technology gap.

Suggested Citation

  • Yener Kandogan, 2003. "Technological Progress Through Trade Liberalization in Transition Countries," William Davidson Institute Working Papers Series 2003-567, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2003-567
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/39953/3/wp567.pdf
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    References listed on IDEAS

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    1. Dani Rodrik, 1988. "Closing the Technology Gap: Does Trade Liberalization Really Help?," NBER Working Papers 2654, National Bureau of Economic Research, Inc.
    2. Grossman, Gene M & Helpman, Elhanan, 1990. "Comparative Advantage and Long-run Growth," American Economic Review, American Economic Association, vol. 80(4), pages 796-815, September.
    3. Oleg Bogomolov, 1987. "The Socialist Countries at a Critical Stage in World Economic Development," Problems of Economic Transition, Taylor & Francis Journals, vol. 30(8), pages 38-54.
    4. Gans, J.S., 1995. "Industrialisation with a Menu of Technology: Appropriate Technologies and the "Big Push"," Papers 95/36, New South Wales - School of Economics.
    5. Daniels, Peter, 1999. "Economic Gains from Technology-Intensive Trade: An Empirical Assessment," Cambridge Journal of Economics, Oxford University Press, vol. 23(4), pages 427-447, July.
    6. Bhagwati, Jagdish N, 1988. "Export-Promoting Trade Strategy: Issues and Evidence," World Bank Research Observer, World Bank Group, vol. 3(1), pages 27-57, January.
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    More about this item

    Keywords

    Technology gap; Trade Liberalization; Transition; Market reforms;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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