Optimal trade policy with international technology diffusion

Yan Bai, Keyu Jin, Dan Lu and Hanxi Wang

Journal of International Economics, 2025, vol. 153, issue C

Abstract: We study optimal dynamic trade policies in an Eaton–Kortum model with technology diffusion through trade. Trade affects technology by determining the distribution from which potential producers draw their insights. Our theory shows that optimal policies capture dynamic motives for a country to alter global technology. These policies take into account selection effects and country endowments that affect the degree and quality of diffusion. We provide explicit formulas showing that a country should subsidize imports that raise domestic learning quality and reduce export taxes when higher foreign productivity benefits the home country and increased exports improve foreign learning. We quantify these dynamic policies and their welfare implications using cross-country data.

Keywords: Technology diffusion; Trade; Optimal dynamic policies (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S002219962400165X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Optimal Trade Policy with International Technology Diffusion (2024)
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:eee:inecon:v:153:y:2025:i:c:s002219962400165x

DOI: 10.1016/j.jinteco.2024.104038

Access Statistics for this article

Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and Rodríguez-Clare, Andrés

More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().