Strategic Export Promotion
AbstractThis 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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Bibliographic InfoPaper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 101.
Length: 28 pages
Date of creation: Oct 2006
Date of revision: Oct 2006
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; Fragmentation
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F31 - International Economics - - International Finance - - - Foreign Exchange
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- Federico Etro, 2006. "Political geography," Public Choice, Springer, vol. 127(3), pages 321-343, June.
- Federico Etro, 2006. "Market Leaders and Industrial Policy," Working Papers 103, University of Milano-Bicocca, Department of Economics, revised Nov 2006.
- Federico Etro, 2004. "The Political Economy of Fiscal and Monetary Unions," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 63(3-4), pages 289-328, December.
- Etro, Federico, 2008. "Growth leaders," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1148-1172, September.
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