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Does Trade Liberalization Benefit Consumers? The
Role of Forward-looking Firms |
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Kuo-Feng Kao and Cheng-Hau
Peng |
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Working Paper |
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Kuo-Feng Kao |
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We analyze firms¡¦ incentive to invest in product R&D
and the welfare implication under antidumping policy. It is found that, when one of
the governments implements antidumping policy, the protected firm decreases
its product R&D investment, while the constrained firm invests more.
Moreover, the total product R&D investment decreases which in turn
deteriorates global welfare. On the other hand, when both governments
undertake antidumping policies, both firms invest more in product R&D
than that under free trade and the global welfare is therefore enhanced. |
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