R&D In The Network Of International Trade: Multilateral Versus Regional Trade Agreements

Recent empirical evidence has shown that trade liberalization promotes innovation and productivity growth in individual rms. This paper argues that different types of trade liberalization-multilateral versus regional-may lead to different R&D and productivity levels of firms. Trade agreements between countries are modeled with a network: nodes represent countries and a link between the nodes indicates the existence of a trade agreement. In this framework, the multilateral trade agreement is represented by the complete network while the overlap of regional trade agreements is represented by the hub-and-spoke trade system.