Spillovers from Foreign Exporters

Anna Eulerich, geb. Bohnstedt

No 400, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: We develop a general equilibrium model of international trade with heterogeneous firms that accounts for productivity spillovers transmitted by foreign exporters. Everything else equal, stronger spillovers increase welfare. We embed the model framework into a trade policy scenario where countries strategically set inter-country variable trade costs for the trading partner. In the strategic Nash-equilibrium policy, governments trade-off welfare gains from protectionism and those which are due to spillovers from foreign exporters. The equilibrium degree of protectionism is decreasing in the strength of the spillover. Policy coordination induces welfare gains, but these gains can be humpshaped in the spillover strength.

Keywords: spillovers; heterogeneous firms (search for similar items in EconPapers)
JEL-codes: F1 L25 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:400

DOI: 10.4419/86788455

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