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

Author

Listed:
  • Thanh Le

    (UQ [All campuses : Brisbane, Dutton Park Gatton, Herston, St Lucia and other locations] - The University of Queensland)

  • Cuong Le Van

    (IPAG Business School, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

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.

Suggested Citation

  • Thanh Le & Cuong Le Van, 2016. "Trade Liberalisation and Optimal R&D Policies in a Model of Exporting Firms Conducting Process Innovation," Post-Print halshs-01314650, HAL.
    • Handle: RePEc:hal:journl:halshs-01314650
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01314650
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    References listed on IDEAS

    as
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    Cited by:

    1. Normizan Bakar & Bakti Hasan-Basri, 2017. "Strategic Innovation and Consumer Preferences: An Analysis of Malaysian Hybrid Car Policy," Millennial Asia, , vol. 8(1), pages 64-77, April.

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    More about this item

    Keywords

    Trade; R&D spillovers; subsidies; welfare; process innovation;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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