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Article

R&D in Trade Networks: The Role of Asymmetry

This paper argues that asymmetry in countries' trade exposure is an important determinant of fi rms'
R&D, productivity and countries' welfare. We model a choice of R&D in a given trade network focusing
on asymmetric hub-and-spoke networks and symmetric networks. We find that R&D, productivity
and total surplus are highest in a hub economy and lowest in a spoke, while intermediate levels
are exhibited by countries in a symmetric network. Thus, regional/preferential trade agreements,
resulting in asymmetric trade networks, benefi t hubs but harm spokes. By contrast, multilateral trade
agreements, resulting in a complete network, generate equal R&D and welfare bene fits for all countries.