Ruhr Economic Papers
Ruhr Economic Papers #400
Spillovers from Foreign Exporters
by Anna Bohnstedt
University of Duisburg-Essen, 01/2013, 35 S./p., 8 Euro, ISBN 978-3-86788-455-6 DOI: 10.4419/86788455download
We develop a general equilibrium model of international trade with heterogeneous firms that accounts for productivity spillovers transmitted by foreign exporters. Everything else equal, stronger spillovers increase welfare. We embed the model framework into a trade policy scenario where countries strategically set inter-country variable trade costs for the trading partner. In the strategic Nash-equilibrium policy, governments trade-off welfare gains from protectionism and those which are due to spillovers from foreign exporters. The equilibrium degree of protectionism is decreasing in the strength of the spillover. Policy coordination induces welfare gains, but these gains can be hump-shaped in the spillover strength.
JEL-Classification: F1, L25
Keywords: Spillovers; heterogeneous firms