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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 (Unpublished)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 |
| 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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