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Strategic Export Promotion

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Author Info

  • Federico Etro

    () (Department of Economics, University of Milan-Bicocca)

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 Function: First version, 2006
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Bibliographic 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;

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Cited by:
  1. Federico Etro, 2006. "Political geography," Public Choice, Springer, vol. 127(3), pages 321-343, June.
  2. Etro, Federico, 2008. "Growth leaders," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1148-1172, September.
  3. Federico Etro, 2006. "Market Leaders and Industrial Policy," Working Papers 103, University of Milano-Bicocca, Department of Economics, revised Nov 2006.

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