Entry Liberalization, Export Subsidy and R&D

Roy Chowdhury, Prabal (2006): Entry Liberalization, Export Subsidy and R&D. Unpublished.

Abstract

We examine, in the context of less developed countries, the R&D behaviour of igopolistic firms who compete over R&D, as well as output levels. We also assume that the firms can sell in either of the two markets - the domestic, or the foreign. We show that entry liberalization, despite increasing the level of competitiveness, does not affect the level of R&D. An increase in export subsidy may, however, lead to an increase in domestic R&D. Both these results contradict the popular argument that the levels of domestic R&D is positively related to the level of domestic competitiveness. We also demonstrate that any foreign firm that may enter selects a level of R&D that is atleast as efficient as that selected by any domestic firm. Finally, we demonstrate that entry liberalization has a positive effect on exports, as well as aggregate output.

• Item Type: MPRA Paper
• Language: English
• Keywords: Entry liberalization; export subsidy; R&D; competitiveness
• Subjects: F - International Economics > F1 - Trade > F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations; O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O32 - Management of Technological Innovation and R&D

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