Cost effectiveness of R&D and the robustness of strategic trade policy
Praveen Kujal () and
Juan Ruiz ()
UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía
This paper analyzes the incentives for governments to impose export subsidies when firms invest in a cost saving technology before market competition. Governments first impose an export subsidy or a tax. After observing export policy, firms invest in cost reducing R and D and subsequently compete in the market. Governments subsidize exports under Cournot competition. Under Bertrand competition, export subsidies are positive whenever R and D is sufficiently costeffective at reducing marginal costs, and negative otherwise. The trade policy reversal found in models without endogenous sunk costs disappears if R and D is sufficiently cost-effective. Output subsidies are more robust than implied by the recent literature.
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Working Paper: Cost effectiveness of R&D and the robustness of Strategic Trade Policy (2004)
Working Paper: Cost Effectiveness of R&D and the Robustness of Strategic Trade Policy (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we030401
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