Together at Last: The Endogenous Formation of Free Trade Agreements and International R&D Networks

Tat Thanh Tran and Vasileios Zikos

MPRA Paper from University Library of Munich, Germany

Abstract: We study how free trade agreements between countries and international R&D networks between firms emerge endogenously. The government of each country can initiate bilateral free trade agreements to abolish the import tariffs of other countries. Firms can decide whether and with whom to form R&D collaborations. We build a new model of double-layer networks where the network of free trade agreements is formed in the first layer, and the R&D network is formed in the second layer. Consistently with the stylized facts, we find that free trade agreements can promote international R&D collaboration between firms. Private incentives to form free trade agreements are aligned with societal ones. For R&D networks, by contrast, we identify a conflict between private and social incentives.

Keywords: Free trade agreements; R&D collaboration; tariffs; innovation. (search for similar items in EconPapers)
JEL-codes: D85 F10 L13 L20 O31 (search for similar items in EconPapers)
Date: 2014-11-20
New Economics Papers: this item is included in nep-cdm, nep-cse, nep-ger, nep-ino, nep-int and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:66187

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