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Rent-shifting export subsidies with an imported intermediate product

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  • Ishikawa, Jota
  • Spencer, Barbara J.

Abstract

This paper argues that export subsidies aimed at shifting rents from foreign to domestic producers of a final good may also serve to shift rents to foreign firms supplying an intermediate good, weakening the incentive for the subsidy. By contrast, assuming Cournot competition for both the final and intermediate goods, this second layer of rent-shifting between final and intermediate good firms can strengthen the argument for an export subsidy if intermediate good firms are domestic. The domestic welfare implications of alternative rent-shifting policies (a production subsidy and an import tariff) at the intermediate good stage are also considered.
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Suggested Citation

  • Ishikawa, Jota & Spencer, Barbara J., 1999. "Rent-shifting export subsidies with an imported intermediate product," Journal of International Economics, Elsevier, vol. 48(2), pages 199-232, August.
    • Handle: RePEc:eee:inecon:v:48:y:1999:i:2:p:199-232
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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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