Product R&D and Process R&D under Optimal Discriminatory Tariff Regime and MFN Tariff Regime
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This paper analyzes the effect of the MFN tariff regime and the optimal discriminatory tariff regime on process R&D and product R&D investment of foreign exporting firms. Foreign firms choose a higher process R&D and a higher product R&D investment under the MFN tariff regime than under the optimal discriminatory tariff regime due to the complementary interaction between foreign firms' process R&D and product R&D investment choices under Bertrand competition. This paper shows that the adoption of the MFN tariff regime does not necessarily guarantee the improvement of the social welfare of an importing country, which is a rebuttal to Choi's (1995) results. The MFN tariff policy can actually have a negative effect on importing country's welfare relative to optimal discriminatory tariff policy if there are product and process R&D investment choices of exporting firms. This result implies that there is lack of precommitment value of MFN policy, which is in fact the reverse to Choi (1995).
Abstract
This paper analyzes the effect of the MFN tariff regime and the optimal discriminatory tariff regime on process R&D and product R&D investment of foreign exporting firms. Foreign firms choose a higher process R&D and a higher product R&D investment under the MFN tariff regime than under the optimal discriminatory tariff regime due to the complementary interaction between foreign firms' process R&D and product R&D investment choices under Bertrand competition. This paper shows that the adoption of the MFN tariff regime does not necessarily guarantee the improvement of the social welfare of an importing country, which is a rebuttal to Choi's (1995) results. The MFN tariff policy can actually have a negative effect on importing country's welfare relative to optimal discriminatory tariff policy if there are product and process R&D investment choices of exporting firms. This result implies that there is lack of precommitment value of MFN policy, which is in fact the reverse to Choi (1995).
참고문헌 (18)
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