Endogenous sunk costs, flexible manufacturing and the productivity effects of international trade

Carsten Eckel

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: The paper addresses the productivity effects of international trade in the presence of flexible manufacturing and endogenous sunk costs (cost-reducing R\&D). It shows that international trade raises R\&D expenditures, but this will not necessarily boost productivity because of possibly counteracting market structure effects. The analysis is conducted in general equilibrium so that implications for real wages and welfare can also be addressed. Both can fall when trade leads to excessive R\&D investment.

Date: 2009
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Citations: View citations in EconPapers (14)

Published in Scandinavian Journal of Economics 2 111(2009): pp. 369-386

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Journal Article: Endogenous Sunk Costs, Flexible Manufacturing and the Productivity Effects of International Trade (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:20532

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