Discussion Paper Details

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Title: International Leapfrogging and Subsidies

Author(s): Stefan Lutz

Publication Date: March 1997

Keyword(s): Country Asymmetries, Leapfrogging, Oligopoly, Quality, Trade and Vertical Product Differentiation

Programme Area(s): International Trade and Regional Economics

Abstract: The recent extensive study of vertical product differentiation models has allowed for the analysis of international trade issues in the presence of country asymmetries in terms of product qualities, technology, costs, market size and income. In the presence of such asymmetries, national industries will either be market leaders or be lagging behind in the international marketplace in terms of their product qualities. The resulting asymmetry in profits creates powerful incentives for lagging industries as well as their national governments to reverse this situation to their advantage, i.e. to induce ?leapfrogging? in terms of product qualities. This paper presents an analysis of subsidies as a facilitating device for leapfrogging.

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Bibliographic Reference

Lutz, S. 1997. 'International Leapfrogging and Subsidies'. London, Centre for Economic Policy Research.