costs has no impact at all, in steady-state, on firms' investments in process innovation. We then show that if only a subset … of firms export, a decline in marginal trade costs raises process innovation in exporting firms relative to that of non …-exporting firms. This reallocation of process innovation reinforces existing patterns of comparative advantage, and leads to an …

-constraints and the profitability of engaging in innovation (R&D). We decompose the effects of RER changes on productivity growth …