Bai, Yan, Jin, Keyu 
ORCID: 0000-0002-0139-799X, Lu, Dan and Wang, Hanxi
(2025)
Optimal trade policy with international technology diffusion.
Journal of International Economics, 153.
ISSN 0022-1996
Abstract
We study optimal dynamic trade policies in an Eaton–Kortum model with technology diffusion through trade. Trade affects technology by determining the distribution from which potential producers draw their insights. Our theory shows that optimal policies capture dynamic motives for a country to alter global technology. These policies take into account selection effects and country endowments that affect the degree and quality of diffusion. We provide explicit formulas showing that a country should subsidize imports that raise domestic learning quality and reduce export taxes when higher foreign productivity benefits the home country and increased exports improve foreign learning. We quantify these dynamic policies and their welfare implications using cross-country data.
| Item Type: | Article |
|---|---|
| Additional Information: | © 2024 Elsevier B.V. |
| Divisions: | Economics |
| Subjects: | H Social Sciences > HF Commerce |
| Date Deposited: | 07 Jan 2025 14:51 |
| Last Modified: | 07 Jan 2025 14:54 |
| URI: | http://eprints.lse.ac.uk/id/eprint/126620 |
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