Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/30668 
Year of Publication: 
2009
Series/Report no.: 
CESifo Working Paper No. 2796
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
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
R&D
productivity
market structure
JEL: 
F12
F15
Document Type: 
Working Paper
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