Empirical Analyses of U.S. Congressional Voting on Recent FTA
The B.E. Journal of Economic Analysis & Policy
In small and open economies, absorption of foreign knowledge through international trade often plays a more important role for domestic innovation and growth than investment in domestic R&D. This suggests that trade policies can increase knowledge spillovers from abroad. Public support to R&D can be motivated both by positive internal knowledge externalities and by its ability to expand absorptive capacity. This dynamic, empirical, general equilibrium analysis models these interplays between
... terplays between R&D, trade and productivity. It compares public R&D support and export promotion of R&D based products with respect to long term growth and welfare impacts. We find that export promotion is inferior to R&D support in spurring R&D. However, it is not outperformed in terms of welfare generation. The reason is that existing and politically persistent policy interventions create inefficiencies that can be counteracted by R&D-based export promotion as a second-best policy. KEYWORDS: absorptive capacity, computable general equilibrium (CGE) model, endogenous growth, research and development, international spillovers * We acknowledge funding from the Norwegian Research Council programme RENERGI and would also like to thank two anonymous referees for helpful suggestions.