Trade Liberalization, Competition and Growth

Omar Licandro (licandro.omar@gmail.com) and Antonio Navas (a.navas@sheffield.ac.uk)

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: Increasing evidence support the claim that international trade enhances innovation and productivity growth through an increase in competition. This paper develops a two-country endogenous growth model, with firm specific R&D and a continuum of oligopolistic sectors under Cournot competition to provide a theoretical support to this claim. Since countries are assumed to produce the same set of varieties, trade openness makes markets more competitive, reducing prices and increasing quantities. Under Cournot competition, trade is pro-competitive. Since firms undertake cost reducing innovations, the increase in production induced by a more competitive market push firms to innovate more. Consequently, a reduction on trade barriers enhances growth by reducing domestic firm's market power.

Keywords: Trade Openness; Growth; Competition (search for similar items in EconPapers)
JEL-codes: F13 F43 O3 (search for similar items in EconPapers)
Pages: 16
Date: 2010-03-04
New Economics Papers: this item is included in nep-bec, nep-com, nep-cse, nep-dge, nep-fdg and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://pareto.uab.es/wp/2010/80610.pdf (application/pdf)

Related works:
Working Paper: Trade Liberalization, Competition and Growth (2015)
Journal Article: Trade Liberalization, Competition and Growth (2011)
Working Paper: Trade Liberalization, Competition and Growth (2008)
Working Paper: Trade Liberalization, Competition and Growth (2007)
Working Paper: Trade liberalization, competition and growth (2007)
Working Paper: TRADE LIBERALIZATION, COMPETITION AND GROWTH (2007)
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:aub:autbar:806.10

Access Statistics for this paper

More papers in UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) Contact information at EDIRC.
Bibliographic data for series maintained by Xavier Vila (xavier.vila@uab.cat).