Causal observation shows that many developing countries adopt certain strategic trade measures such as export subsidies and domestic currency devaluation to promote their exports. Are there any economic rationality behind these measures? The answer is yes. Using a general equilibrium model, we find that export subsidies and devaluation can unambiguously raise labour employment and the output of export firms. But whether these measures can stimulates the output of non-export domestic firms depends on a sufficient and necessary condition given in this paper.
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Paper provided by La Trobe - Department of Economics in its series Papers with number
97.18.
Find related papers by JEL classification: F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations