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Title:Innovation and trade with heterogeneous firms PDF Logo
Authors:Long, Ngo Van
Raff, Horst
Stähler, Frank
Issue Date:2009
Series/Report no.:CESifo working paper 2796
Abstract:This paper examines how trade liberalization affects the innovation incentives of firms, and what this implies for industry productivity. For this purpose we develop a reciprocal dumping model of international trade with heterogeneous firms and endogenous R&D. Among the robust results that hold both in the short run when there is no entry, and in the long run under free entry are that trade liberalization increases (decreases) aggregate R&D for low (high) trade costs and increases expected industry productivity. The central results of the paper regarding firm and industry level R&D spending differ significantly from the case of homogeneous firms.
Subjects:international trade
firm heterogeneity
market structure
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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