Second-best trade policies, R&D spillovers and government (in)ability to precommit in an intra-industry trade framework

0351289 - NHU-C 2011 CZ eng J - Journal Article
Žigić, Krešimir
Second-best trade policies, R&D spillovers and government (in)ability to precommit in an intra-industry trade framework.
CERGE-EI Working Paper Series. -, č. 427 (2010), s. 1-71. ISSN 1211-3298
R&D Projects: GA MŠMT LC542
Institutional research plan: CEZ:MSM0021620846
Keywords : government commitment * optimal tariffs and R&D subsidies * first-best versus second-best strategic policy * R&D spillovers
Subject RIV: AH - Economics
http://www.cerge-ei.cz/pdf/wp/Wp427.pdf

We introduce an intra-industry setup in order to reconsider the consequences of government (in)ability to precommit to its policies when it is constrained to only one policy instrument (second-best policies). This setup nests the standard frameworks of strategic trade policy - the “third-market” and the “home-market” framework. We also analyze how robust the signs of particular policy instruments (R&D subsidies) are when passing from the “second-best” to the “first-best” policy and show that in the considered setup this issue is closely related to the issue of the government commitment. The policy instruments under consideration are import tariffs and export and R&D subsidies, and there are R&D spillovers from the domestic firm to the foreign firm.
Permanent Link: http://hdl.handle.net/11104/0191074