Innovation and Trade Policy Coordination: The Role of Firm Heterogeneity

Antonio Navas; Davide Sala

doi:10.1111/twec.12278

journal article Jul 04, 2015

Innovation and Trade Policy Coordination: The Role of Firm Heterogeneity

Antonio Navas Davide Sala

The World Economy Vol. 38 No. 8 pp. 1205-1224 · Wiley

View at Publisher Save 10.1111/twec.12278

Abstract

AbstractRecent studies have concluded that R&D grants can induce firms to export and that exporting and innovating can be complementary activities at the firm level. Yet the trade literature has paid little attention to the scope of innovation policy as a stimulus to both trade and innovation. To investigate this question, we rely on a general workhorse model of trade and firm heterogeneity with firm investments in R&D activities. The interplay of innovation and trade policies uncover novel results. In particular, we show that the effects of either policy depend on the degree of protectionism in a country. Therefore, countries can respond differently to the same policy, and similarly to different policies. In such a context, different governments may face different trade‐offs in achieving a given target.

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Details

Published: Jul 04, 2015
Vol/Issue: 38(8)
Pages: 1205-1224
License: View

Authors

A

Antonio Navas

Department of Economics The University of Sheffield Sheffield UK

D

Davide Sala

Department of Business and Economics University of Southern Denmark Odense Denmark

Cite This Article

Antonio Navas, Davide Sala (2015). Innovation and Trade Policy Coordination: The Role of Firm Heterogeneity. The World Economy, 38(8), 1205-1224. https://doi.org/10.1111/twec.12278

Innovation and Trade Policy Coordination: The Role of Firm Heterogeneity

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