Tomaru, Yoshihiro (2010): A Public Firm's R&D Policy and Trade Liberalization.
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This paper studies a public firm's incentive to raise its productive efficiency by undertaking cost-reducing R&D investment when it competes against a foreign private firm. Our focus is to ravel out how a decrease in an importing tariff levied on foreign goods affects this investment level inter alia. We show that when the government imposes non-negative tariffs, a tariff reduction lowers the R&D investment, irrespective of whether the public firm has downward or upward sloping reaction curve. Namely, R&D investment conducted by the public firm is substitutable to an importing tariff. Furthermore, under a linear demand assumption, it is concluded that a tariff reduction necessarily enhances world welfare if both R&D investment and tariffs are set to domestic welfare-maximizing levels. More strict assumptions on marginal cost and R&D cost function make complete trade liberalization desirable from the viewpoint of world welfare.
|Item Type:||MPRA Paper|
|Original Title:||A Public Firm's R&D Policy and Trade Liberalization|
|Keywords:||Mixed Oligopoly; R&D; Trade Liberalization|
|Subjects:||L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L32 - Public Enterprises; Public-Private Enterprises
F - International Economics > F1 - Trade > F13 - Trade Policy; International Trade Organizations
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets
|Depositing User:||Yoshihiro Tomaru|
|Date Deposited:||18. Jan 2011 20:12|
|Last Modified:||12. Feb 2013 20:36|
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