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Innovation and Trade Policy in a Globalized World

Giammario Impullitti, Ufuk Akcigit and Sina T. Ates

No 15804, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: What is the role of innovation policy in open economy? We address this question employ- ing a new innovation-driven growth model with two large open economies at different stages of development. We examine the implications of the U.S. Research and Experimentation Tax Credit, introduced in 1981, and alternative protectionist policies. Key findings are: First, the tax credit generates substantial gains over medium and long horizons. Second, protectionist measures generate large dynamic losses by distorting the firms’ innovation incentives. Third, the optimal R&D subsidy decreases in trade openness. Fourth, the optimal unilateral import tariff is zero for all policy horizons.

Keywords: Economic growth; Innovation policy; Open economy; Trade policy (search for similar items in EconPapers)
JEL-codes: F13 F43 F60 O40 (search for similar items in EconPapers)
Date: 2018-04
New Economics Papers: this item is included in nep-cwa, nep-ino, nep-int and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: Innovation and trade policy in a globalized world (2018) Downloads
Working Paper: Innovation and Trade Policy in a Globalized World (2018) Downloads
Working Paper: Innovation and trade policy in a globalized world (2018) Downloads
Working Paper: Innovation and Trade Policy in a Globalized World (2018) Downloads
Working Paper: Innovation and Trade Policy in a Globalized World (2018) Downloads
Working Paper: Innovation and Trade Policy in a Globalized World (2018) Downloads
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