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Proximity to the frontier, markups, and the response of innovation to foreign competition

The impacts of rising competition on innovation remain unclear, and often depend on country context. This column analyses the impact of increased import competition from China on innovation by Chilean firms. It finds a negative overall impact of competition on innovation indicators. Low-productivity firms in particular see declines across all innovation measures, while the ....

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The longer-term impact of the African Growth and Opportunity Act

Jaime de Melo, Alberto Portugal-Perez
Economists do not agree on whether preferential access to foreign markets can foster industrial development, particularly in Africa. Some see it as a more effective means than conventional infant industry protection “to transport a bit of the economic miracle from China to Africa” (Collier and Venables 2007). The benefits of preferential access are conditional on competing successfully in foreign markets, rather than in less contested domestic markets. In addition, prolonged privileged access cannot be taken for granted, creating stronger incentives to improve performance. In support of this view is evidence that privileged access to the US market under the African Growth and Opportunity Act (AGOA) initially spurred growth in African exports (e.g. Frazer and Van Biesebroeck 2010). ....

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