EconStor >
Christian-Albrechts-Universität Kiel (CAU) >
Department of Economics, Universität Kiel  >
Economics Working Papers, Department of Economics, CAU Kiel >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/22036
  
Title:The Effects of Trade Liberalization on Productivity and Welfare: The Role of Firm Heterogeneity, R&D and Market Structure PDF Logo
Authors:Stähler, Frank
Raff, Horst
Long, Ngo Van
Issue Date:2007
Series/Report no.:Economics working paper / Christian-Albrechts-Universität Kiel, Department of Economics 2007,20
Abstract:This paper develops an oligopolistic model of international trade with heterogeneous firms and endogenous R&D to examine how trade liberalization affects firm and industry productivity, as well as social welfare. We identify four effects of trade liberalization on productivity: (i) a direct effect through changes in R&D investment; (ii) a scale effect due to changes in firm size; (iii) a selection effect due to inefficient firms leaving the market; and (iv) a market-share reallocation effect as efficient firms expand and inefficient firms reduce their output. We show how these effects operate in the short run when market structure is fixed, and in the long run when market structure is endogenous. Among the robust results that hold for any market structure are that trade liberalization (i) increases (decreases) aggregate R&D for low (high) trade costs; (ii) increases expected firm size if trade costs are high; and (iii) raises expected social welfare if trade costs are low.
Subjects:international trade
firm heterogeneity
R&D
productivity
market structure
JEL:F12
F15
Document Type:Working Paper
Appears in Collections:Economics Working Papers, Department of Economics, CAU Kiel

Files in This Item:
File Description SizeFormat
EWP-2007-20.pdf425.43 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/22036

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.