Trade Liberalization, Competition and Growth

Omar Licandro ()
Authors registered in the RePEc Author Service: Antonio Navas ()

No 436, Working Papers from Barcelona School of Economics

Abstract: Increasing evidence support the claim that international trade enhances innovation and productivity growth through an increase in competition. This paper develops a two-country endogenous growth model, with firm specific R&D and a continuum of oligopolistic sectors under Cournot competition to providea theoretica lsupport to this claim. Since countries are assumed to produce the same set of varieties,trade openness makes markets more competitive, reducing prices and increasing quantities. Under Cournot competition, trade is pro-competitive. Since firms undertake cost reducing innovations, the increase in production induced by a more competitive market push firms to innovate more. Consequently, a reduction on trade barriers enhances growth by reducing domestic firm's market power.

Keywords: competition; growth; Trade Openness (search for similar items in EconPapers)
JEL-codes: F13 F43 O3 (search for similar items in EconPapers)
Date: 2015-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Trade Liberalization, Competition and Growth (2011)
Working Paper: Trade Liberalization, Competition and Growth (2010)
Working Paper: Trade Liberalization, Competition and Growth (2008)
Working Paper: Trade Liberalization, Competition and Growth (2007)
Working Paper: Trade liberalization, competition and growth (2007)
Working Paper: TRADE LIBERALIZATION, COMPETITION AND GROWTH (2007)
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