Dewit, Gerda and Leahy, Dermot (2011) Strategic Investment and the Gains from Trade (N216-11). NUI Maynooth, NUI Maynooth. (Unpublished)

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Abstract

This paper examines how trade liberalisation affects innovation, profits and welfare when firms are engaging in strategic R&D investment. We show that there are multiple equilibria including an autarky equilibrium for a range of high but non-prohibitive trade costs. At lower trade costs, only the trading equilibrium survives. Welfare is U-shaped in the trade costs, so a small fall in trade costs can be welfare reducing. However we find a threshold level of the effectiveness of investment above which trade is always welfare superior to autarky.

Item Type:	Other
Keywords:	Reciprocal Markets; Strategic R&D Investment; Trade Costs; Trade Liberalisation; Effectiveness of R&D;
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	2462
Identification Number:	N216-11
Depositing User:	Ms Sandra Doherty
Date Deposited:	07 Mar 2011 14:12
Publisher:	NUI Maynooth
URI:
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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