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The Impact of Brexit on Foreign Investment and Production
In this paper, we estimate the impact of increasing costs on foreign producers following a withdrawal of the United Kingdom from the European Union (popularly known as Brexit). Our predictions are based on simulations of a multicountry neoclassical growth model that includes multinational ?rms investing in research and development (R&D), brands, and organizational capital that are used nonrivalrously by their subsidiaries at home and abroad. For the main simulation, we assume that U.K. investments in the European Union face the same restrictions as Norway?s and that E.U. investments in the ...
What do drug monopolies cost consumers in developing countries?
This paper quantifies the effects of drug monopolies and low per-capita income on pharmaceutical prices in developing economies using the example of the antiretroviral drugs (ARVs) used to treat HIV.
The dual nature of trade: measuring its impact on imitation and growth
Imports of goods that embody foreign technology raise a country's output directly as inputs into production and indirectly through reverse-engineering of these goods, which contributes to domestic imitation and innovation. This paper first quantifies spillovers from high-technology imports from developed countries to domestic imitation and innovation in both developed and developing countries. It then considers the contribution of foreign and domestic innovation to real per capita GDP growth. ; International patent data for forty countries from 1970 to 1985 are used to create proxies for ...
Openness and the Optimal Taxation of Foreign Know-How
Developing countries frequently offer tax incentives and even subsidize the entry and operation of foreign firms. I examine the optimality of such policies in an economy where growth is driven by entrepreneurial know-how, a skill that is continuously updated on the basis of the productive ideas implemented in the country. Openness allows foreign ideas to disseminate inside a country and can foster the country's domestic accumulation of know- how. With externalities, however, laissez-faire openness is suboptimal and can be growth-and even welfare-reducing. I examine the gains from openness ...
Markets, Externalities, and the Dynamic Gains of Openness
Inflows of foreign knowledge are the key for developing countries to catch up with the world technology frontier. In this paper, I construct a simple tractable model to analyze (a) the incentives of foreign firms to bring their know-how to a developing country and (b) the incentives of domestic firms to invest in their own know-how, given the exposure to foreign ideas and competition. The model embeds two diffusion mechanisms typically considered separately in the literature: externalities and markets. The dynamic gains of openness can be substantial under either mechanism, but their relative ...