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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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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 48 (1999)
Issue (Month): 2 (August)
Pages: 199-232

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Handle: RePEc:eee:inecon:v:48:y:1999:i:2:p:199-232

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Web page: http://www.elsevier.com/locate/inca/505552

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  1. Bernhofen, Daniel M, 1997. "Strategic Trade Policy in a Vertically Related Industry," Review of International Economics, Wiley Blackwell, vol. 5(3), pages 429-33, August.
  2. Neary, J Peter, 1991. "Cost Asymmetries in International Subsidy Games: Should Governments Help Winners or Losers?," CEPR Discussion Papers 560, C.E.P.R. Discussion Papers.
  3. James A. Brander & Barbara J. Spencer, 1983. "Trade Warfare: Tariffs and Cartels," NBER Working Papers 1193, National Bureau of Economic Research, Inc.
  4. Maggi, Giovanni, 1996. "Strategic Trade Policies with Endogenous Mode of Competition," American Economic Review, American Economic Association, vol. 86(1), pages 237-58, March.
  5. Seade, J, 1985. "Profitable Cost Increases and the Shifting of Taxation : Equilibrium Response of Markets in Oligopoly," The Warwick Economics Research Paper Series (TWERPS) 260, University of Warwick, Department of Economics.
  6. Jones, R.W. & Spencer, B.J., 1989. "Trade And Protection In Vertically Related Markets," RCER Working Papers 195, University of Rochester - Center for Economic Research (RCER).
  7. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  8. Krishna, Kala & Thursby, Marie, 1991. "Optimal policies with strategic distortions," Journal of International Economics, Elsevier, vol. 31(3-4), pages 291-308, November.
  9. Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May.
  10. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  11. Spencer, Barbara J & Jones, Ronald W, 1991. "Vertical Foreclosure and International Trade Policy," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 153-70, January.
  12. Salinger, Michael A, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 345-56, May.
  13. Chang, Winston W & Chen, Fang-yueh, 1994. "Vertically Related Markets: Export Rivalry between DC and LDC Firms," Review of International Economics, Wiley Blackwell, vol. 2(2), pages 131-42, June.
  14. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
  15. Seade, Jesus, 1980. "The stability of cournot revisited," Journal of Economic Theory, Elsevier, vol. 23(1), pages 15-27, August.
  16. Ishikawa, Jota & Lee, Ki-Dong, 1997. "Backfiring tariffs in vertically related markets," Journal of International Economics, Elsevier, vol. 42(3-4), pages 395-423, May.
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