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Strategic Export Promotion

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Author Info
Federico Etro () (Department of Economics, University of Milan-Bicocca)

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Abstract

This paper provides a general characterization of optimal export promoting policies for foreign competitive markets and apply it to strategic trade policy and exchange rate policy. Contrary to the ambiguous results of strategic trade policy under barriers to entry in the third market, I find that it is always optimal to subsidize exports as long as entry is free (under both strategic substitutability and complementarity) and I explicitly derive the optimal export subsidies under Cournot and Bertrand competition. Finally, I show that there is always a strategic incentive to implement competitive devaluations when entry in foreign markets is free, but not otherwise.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper101.pdf
File Format: application/pdf
File Function: First version, 2006
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Publisher Info
Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 101.

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Length: 28 pages
Date of creation: Oct 2006
Date of revision: Oct 2006
Handle: RePEc:mib:wpaper:101

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Related research
Keywords: Export Promotion; Strategic Trade policy; Export Subsidies; Competitive Devaluation;

Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F31 - International Economics - - International Finance - - - Foreign Exchange

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Cited by:
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  1. Federico Etro, 2006. "Market Leaders and Industrial Policy," Working Papers 103, University of Milano-Bicocca, Department of Economics, revised Nov 2006. [Downloadable!]
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This page was last updated on 2009-12-6.


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