This paper examines how trade liberalization affects the innovation incentives of firms, and what this implies for industry productivity and social welfare. For this purpose we develop a reciprocal dumping model of international trade with heterogeneous firms and endogenous R&D. We identify two...

This paper discusses environmental policies which aim at a sustainable use of domestic resources which are mobile. It assumes that one country introduces such a policy but the other country does not. If a resource is mobile, strict domestic environmental policies may increase the resource...