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Trade Liberalization, Competition and Growth
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1725-6704
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EUI ECO; 2007/19
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LICANDRO, Omar, NAVAS-RUIZ, Antonio, Trade Liberalization, Competition and Growth, EUI ECO, 2007/19 - https://hdl.handle.net/1814/7106
Abstract
The aim of this paper is to understand whether international trade ma
enhance innovation and growth through an increase in competition. We de
velop a two-country endogenous growth model, both countries producing th
same set of goods, with rm speci c R&D and a continuum of oligopolisti
sectors under Cournot competition. Since countries produce the same se
of goods, trade openness makes markets more competitive, reducing price
and raising the incentives to innovate. More general, a reduction on trad
barriers enhances growth by reducing domestic rms market power.
Keywords: Trade openess, competition and growth, R&D