Trade Liberalisation and Optimal R&D Policies in a Model of Exporting Firms Conducting Process Innovation

Thanh Le and Cuong Le van

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: This paper discusses the impact of trade liberalisation and R&D policies on exporting firms' incentive to innovate and social welfare. Key factors determining the government's optimal policy are the strength of R&D spillover effect and the toughness of firm competition. When firms only compete in an overseas market, the optimal policy is to tax R&D. Trade liberalisation in the overseas market induces a higher R&D tax rate to be imposed on firms. When firms also conduct business in the home market, the government should financially support firms' R&D. Trade liberalisation always increases firms' output sales, R&D investments, and social welfare.

Keywords: Trade; R&D spillovers; subsidies; welfare; process innovation (search for similar items in EconPapers)
Date: 2016-03
New Economics Papers: this item is included in nep-cse
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01314650v1
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Published in 2016

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Related works:
Working Paper: Trade Liberalisation and Optimal R&D Policies in a Model of Exporting Firms Conducting Process Innovation (2016)
Working Paper: Trade Liberalisation and Optimal R&D Policies in a Model of Exporting Firms Conducting Process Innovation (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-01314650

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