Innovation, product quality, variety, and trade performance: an empirical analysis of Germany and the UK

Using the framework of the new trade and endogenous growth theories,this paper finds that factors such as innovation and productquality-proxied by variables such as relative R&D and patentingactivity-help to explain the determination of import volumesfor both Germany and the UK. The econometric work makes an originalcontribution to this area of research by using bilateral importvolume data disaggregated to the four-digit ISIC level.