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Non-scale endogenous growth effects of subsidies for exporters

Author

Listed:
  • Óscar Afonso

    (CEFUP, NIFIP, OBEGEF, Faculdade de Economia, Universidade do Porto)

  • Armando Silva

    (Instituto Politécnico do Porto-ESEIG)

Abstract

We built a general equilibrium endogenous growth model in which final goods are produced either in the relatively skilled-labour intensive exports sector or in the relatively unskilled-labour intensive domestic sector. We show that, by affecting the technological-knowledge bias, subsidies explain the simultaneous rise in the exports sector, the skill wage premium and the economic growth rate. Then, we use a Portuguese longitudinal database (1996-2003) and implement a propensity score matching approach to shed light upon the causal nexus between production-related subsidies and exports. Our empirical results seem to prove the theoretical predictions: subsides generate the rise in the wage premium of exporters and the increase in the relative size of export sector, even if no impact of subsidies is found in the capacity of enhancing new exporters.

Suggested Citation

  • Óscar Afonso & Armando Silva, 2011. "Non-scale endogenous growth effects of subsidies for exporters," FEP Working Papers 429, Universidade do Porto, Faculdade de Economia do Porto.
    • Handle: RePEc:por:fepwps:429
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    References listed on IDEAS

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    More about this item

    Keywords

    Subsidies; Exports; Scale-invariant growth; Wages;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other

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