NORTH–SOUTH TRADE WITH MULTINATIONAL FIRMS AND INCREASING PRODUCT VARIETY* |
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Authors: | Peter Gustafsson Paul S Segerstrom |
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Institution: | 1. National Institute of Economic Research, Sweden;2. Stockholm School of Economics, Sweden |
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Abstract: | We present a model of North–South trade with multinational firms and increasing product variety. Firms engage in innovative R&D to develop new product varieties in the North, and foreign affiliates of multinational firms engage in adaptive R&D to learn how to produce product varieties in the South. We find that a shift to stronger protection of intellectual property rights in the South induces foreign affiliates of multinational firms to increase their R&D expenditures, results in a faster rate of technology transfer within multinational firms, and increases long‐run consumer welfare in both regions. |
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