Learning-by-Doing and Strategic Trade Policy

Hassan Benchekroun, Ngo Van Long and Huilan Tian

Review of International Economics, 1999, vol. 7, issue 3, 493-508

Abstract: The paper models international rivalry between a domestic firm that is going through a learning-by-doing phase, and a mature foreign rival. It is shown that the optimal production subsidy for the domestic firm depends on the degree of strategic sophistication of the foreign firm. Optimal production subsidy rules are derived under various scenarios. They are shown to be very sensitive to the specification of the game between the domestic and the foreign firms. Whether the optimal subsidy should decrease over time depends on the strategic sophistication of the foreign firm. Copyright 1999 by Blackwell Publishing Ltd.

Date: 1999
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Working Paper: LEARNING BY DOING AND STRATEGIC TRADE POLICY (1998)
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