Cost effectiveness of R&D and strategic trade policy

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dc.contributor.author Kujal, Praveen
dc.contributor.author Ruiz, Juan M.
dc.contributor.other Banco de España
dc.date.accessioned 2009-09-29T10:18:02Z
dc.date.available 2009-09-29T10:18:02Z
dc.date.issued 2007
dc.identifier.uri http://hdl.handle.net/10016/5344
dc.description.abstract This paper analyzes the incentives for governments to impose export subsidies when firms invest in a cost saving technology before market competition. Governments first impose an export subsidy or a tax. After observing export policy, firms invest in cost reducing R&D and subsequently compete in the market. Governments subsidize exports under Cournot competition. Under Bertrand competition, export subsidies are positive whenever R&D is sufficiently cost-effective at reducing marginal costs, and negative otherwise. The trade policy reversal found in models without endogenous sunk costs disappears if R&D is sufficiently cost-effective. Thus, output subsidies seem more robust than implied by the recent literature.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries Documento de trabajo
dc.relation.ispartofseries 0701
dc.relation.hasversion http://hdl.handle.net/10016/5354
dc.rights ©Banco de España
dc.subject.other Product Differentiation
dc.subject.other Strategic Trade Policy
dc.subject.other Policy Reversals
dc.subject.other R&D
dc.title Cost effectiveness of R&D and strategic trade policy
dc.type workingPaper
dc.subject.eciencia Economía
dc.rights.accessRights openAccess
dc.type.version submitedVersion
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