Innovation and Trade Policy in a Globalized World

Ufuk Akcigit, Sina T. Ates and Giammario Impullitti

Journal of Political Economy Macroeconomics, 2026, vol. 4, issue 2, 211 - 255

Abstract: What is the role of innovation policy in an open economy, and how does it interact with foreign competition? Our analysis adopts a new innovation-driven growth model with two large open economies at different stages of development, admitting endogenous technology gaps and varying degrees of competition. We examine the US Research and Experimentation Tax Credit and alternative protectionist policies. We find that the tax credit generates substantial welfare gains over medium and long horizons; protectionist measures generate large dynamic losses by distorting firms’ innovation incentives; the optimal R&D subsidy decreases in trade openness; and the optimal unilateral import tariff is positive only for horizons shorter than a decade and zero thereafter.

Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1086/740428 (application/pdf)
http://dx.doi.org/10.1086/740428 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpemac:doi:10.1086/740428

Access Statistics for this article

More articles in Journal of Political Economy Macroeconomics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().