Research and development, voluntary export restriction and tariffs

摘要

The effect of trade policy on domestic Research & Development (R&D) in oligopolistic markets is shown to depend on the nature of policy instruments: tariffs or non-tariff barriers. When the R&D investment has uncertain consequences on marginal cost,a voluntary export restriction (VER) decreases innovation by the domestic firm as compared to the free trade level. This result holds both under Cournot and Bertrand competition. A tariff increases R&D investment. It is a new rationale for Southern firmsto prefer VER as a policy instrument, besides the well-known argument that it facilitates collusion.