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R&D in trade networks: The role of asymmetry

Mariya Teteryatnikova

International Journal of Industrial Organization, 2018, vol. 61, issue C, 307-350

Abstract: This paper argues that asymmetry in countries’ trade exposure is an important determinant of firms’ R&D, productivity and countries’ welfare. We model a choice of R&D in a given trade network focusing on asymmetric hub-and-spoke networks and symmetric networks. We find that R&D, productivity and total surplus are highest in a hub economy and lowest in a spoke, while intermediate levels are exhibited by countries in a symmetric network. Thus, regional/preferential trade agreements, resulting in asymmetric trade networks, benefit hubs but harm spokes. By contrast, multilateral trade agreements, resulting in a complete network, generate equal R&D and welfare benefits for all countries.

Keywords: Trade network; Hub-and-spoke network; Asymmetry; R&D; Oligopolistic competition; Trade agreements (search for similar items in EconPapers)
JEL-codes: O31 D43 L13 F13 D85 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:indorg:v:61:y:2018:i:c:p:307-350