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Economics of export subsidies under costly and imperfect enforcement

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  • Giannakas, Konstantinos
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    Abstract

    The present paper builds on the published literature on agricultural policy analysis under costly and imperfect enforcement by introducing enforcement costs and misrepresentation into the economic analysis of export subsidies. Specifically, the present paper examines the economic causes of cheating on export subsidies and the consequences of enforcement costs and misrepresentation for the welfare effects and the transfer efficiency of this policy instrument. Policy design and implementation is modelled as a sequential game between a government that designs and enforces the policy and the recipients of the payments. Two alternative policy implementation scenarios are considered. In the first scenario, export subsidies are paid to private trading firms while in the second scenario subsidies are paid directly to the producers of the subsidised commodity. Analytical results show that the introduction of enforcement costs and cheating changes the welfare effects of export subsidies and their efficiency in redistributing income to producers. The analysis also shows that, contrary to what is traditionally believed, the incidence of export subsidies depends on the group that is subsidised to export the surplus quantity – the way the policy is implemented. The results provide additional support for the contention that the economic consequences of cheating are highly policy-specific. Finally, the analysis reveals that when the government faces restrictions on either the volume or the value of export subsidies, cheating reduces the distortionary effects of the policy on international markets. This is true irrespective of whether subsidies are paid to trading firms or to producers.

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    File URL: http://purl.umn.edu/118164
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    Bibliographic Info

    Article provided by Australian Agricultural and Resource Economics Society in its journal Australian Journal of Agricultural and Resource Economics.

    Volume (Year): 47 (2003)
    Issue (Month): 4 (December)
    Pages:

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    Handle: RePEc:ags:aareaj:118164

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    Keywords: International Relations/Trade;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Konstantinos Giannakas & Murray Fulton, 2000. "Efficient Redistribution Using Quotas and Subsidies in the Presence of Misrepresentation and Cheating," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 347-359.
    2. Frank A. Cowell, 1990. "Cheating the Government: The Economics of Evasion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532484, December.
    3. Giannakas, Konstantinos & Fulton, Murray, 2000. "The economics of coupled farm subsidies under costly and imperfect enforcement," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 22(1), January.
    4. Giannakas, Konstantinos & Fulton, Murray, 2000. "The economics of coupled farm subsidies under costly and imperfect enforcement," Agricultural Economics, Blackwell, vol. 22(1), pages 75-90, January.
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    Cited by:
    1. Giannakas, Konstantinos, 2009. "The Normative Efficiency Ranking of Output and Export Subsidies under Costly and Imperfect Enforcement," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 10(1), January.

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