Sunk costs of R&D, trade and productivity

The Moulds industry case

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

International trade can create conditions for technological innovation and productivity growth. The mechanism linking trade and innovation is simple. By increasing access to foreign markets, trade allows the best firms to exploit the economies of scale in R&D. The potential to steal market share increases as product differentiation decreases. To measure the empirical importance of this mechanism, I set up and estimate a dynamic equilibrium model with endogenous size and productivity decisions. I then illustrate how the European economic integration induced innovation in the Portuguese Moulds industry and how a potential withdrawal from the EU would negatively affect innovation.

Original languageEnglish
Pages (from-to)1626-1664
JournalThe Economic Journal
Volume127
Issue number603
DOIs
Publication statusPublished - Aug 2017

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Industry
Innovation
Sunk costs
Productivity
Technological innovation
Induced innovation
Product differentiation
Productivity growth
International trade
Economic integration
Market share
Dynamic equilibrium
Economies of scale

Cite this

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title = "Sunk costs of R&D, trade and productivity: The Moulds industry case",
abstract = "International trade can create conditions for technological innovation and productivity growth. The mechanism linking trade and innovation is simple. By increasing access to foreign markets, trade allows the best firms to exploit the economies of scale in R&D. The potential to steal market share increases as product differentiation decreases. To measure the empirical importance of this mechanism, I set up and estimate a dynamic equilibrium model with endogenous size and productivity decisions. I then illustrate how the European economic integration induced innovation in the Portuguese Moulds industry and how a potential withdrawal from the EU would negatively affect innovation.",
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Sunk costs of R&D, trade and productivity : The Moulds industry case. / Santos, Carlos Daniel.

In: The Economic Journal, Vol. 127, No. 603, 08.2017, p. 1626-1664.

Research output: Contribution to journalArticle

TY - JOUR

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