countries engage in asymmetric trade. We obtain explicit links between persistent gaps in productivity growth and the incentives … subsidize hinges on slower productivity growth and is disconnected from the importers' incentive to tax resource inflows i ….e., rent extraction. Moreover, faster productivity growth exacerbates the im- porters' incentive to tax, beyond the rent …

of openness on innovation incentives and productivity growth. Finally, our model predicts that a more globalized world …

. Protectionist measures generate large dynamic losses by distorting the impact of openness on innovation incentives and productivity …

spillovers raise productivity of R&D in the exposed sector. The higher the productivity gap the more profitable investment in R …&D will be. As a result labor productivity in the production department of the exposed sector rises fast. The sheltered sector … realizes no productivity increases but gains because the terms of trade rise in favor of non-tradables. In the long run the …