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Innovation and Trade Policy Coordination: the Role of Firm Heterogeneity

Antonio Navas () and Davide Sala ()

No 2013017, Working Papers from The University of Sheffield, Department of Economics

Abstract: Recent studies have concluded that R&D grants can induce firms to export and that exporting and innovating can be complementary activities at the firm level. Yet the trade literature has paid little attention to the scope of innovation policy as a stimulus to both trade and innovation. To investigate this question we rely on a general work-horse model of trade and firm heterogeneity with firm investments in R&D activities. The multiplicity of equilibria together with the interplay of innovation and trade policies uncover novel results. In particular, we show that the effects of either policy depend on the degree of protectionism in a country. Therefore, countries can respond differently to the same policy, and similarly to different policies. In such a context, different governments may face different degrees of freedom regarding how to achieve a given target. This finding leads us to discuss the issue of policy coordination.

Keywords: innovation; innovation policy; heterogenous firms; technology adoption; trade policy (search for similar items in EconPapers)
JEL-codes: F12 F13 F15 F61 O32 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2013
New Economics Papers: this item is included in nep-cse, nep-ino, nep-int and nep-knm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www.shef.ac.uk/economics/research/serps/articles/2013_017.html First version, 2013 (application/pdf)

Related works:
Journal Article: Innovation and Trade Policy Coordination: The Role of Firm Heterogeneity (2015) Downloads
Working Paper: Innovation and trade policy coordination: the role of firm heterogeneity (2013) Downloads
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