We develop a general equilibrium model with heterogeneous firms à la Melitz (2003), where both the government and firms can invest into R&D to improve the country’s technological potential. A higher technological potential raises the average productivity of firms, thus implying lower consumer...

We develop a general equilibrium model of international trade with heterogeneous firms that accounts for productivity spillovers transmitted by foreign exporters. Everything else equal, stronger spillovers increase welfare. We embed the model framework into a trade policy scenario where...

We develop a general equilibrium model of international trade with heterogeneous firms, where countries can invest into basic research to improve their technological potential. These research investments tighten firm selection and raise the average productivity of firms in the market, thereby...