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North-South trade liberalization and factor reallocations between manufacturing and R&D

Adolfo Cristóbal Campoamor
Authors registered in the RePEc Author Service: Adolfo Cristobal-Campoamor

Economic Modelling, 2021, vol. 96, issue C, 277-294

Abstract: This paper presents a dynamic North-South model of the product cycle, with the aim of assessing the welfare effects of liberalizing trade and strengthening intellectual property rights. We show that the conclusions depend strongly on the relative size of the Southern market and the resulting pricing strategies applied by Southern firms. If the Southern market is small enough relative to that of the North, trade liberalization leads to positive level effects on welfare for both country blocks, although it has neither short- nor long-term bearing on growth and technological diffusion. However, when the size of the Southern economy is similar to or larger than that of the North, gradual trade liberalization may induce factor reallocations between R&D and manufacturing production that could be detrimental to growth and welfare.

Keywords: Product variety; Innovation; Imitation; Transitional dynamics; Intellectual property rights; Bilateral trade liberalization (search for similar items in EconPapers)
JEL-codes: F12 F43 O31 O34 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.econmod.2021.01.008

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