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Taking Trade Policy Seriously: Export Subsidization as a Case Study in Policy Effectiveness

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  • Dani Rodrik

Abstract

In thinking about policy, academic economists alternate between theoretical models in which governments can design finely-tuned optimal interventions and practical considerations which usually assume the government to be incompetent and hostage to special interests. I argue in this paper that neither of these caricatures is accurate, and that there is much to be learned by undertaking systematic, analytical studies of state capabilities -- how they are generated and why they differ across countries and issue areas. Case studies of export subsidization in Korea, Brazil, Turkey, India, Kenya, and Bolivia are presented to confront usual presumptions against actual experience. Contrary to conventional wisdom, the successful cases (Korea and Brazil) turn out to be ones in which the government exercised discretion and selectivity, while the most uniform and non-discretionary cases (Kenya and Bolivia) were clear failures. The paradox is explained in terms of state autonomy and policy coherence.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4567.

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Date of creation: Dec 1993
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Publication status: published as Alan Dearforf, et al, eds. New Directions in Trade Theory, Ann Arbor, MI: University of Michigan Press, 1995.
Handle: RePEc:nbr:nberwo:4567

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  1. Andrei Shleifer & Robert Vishny, 1991. "Pervasive Shortages Under Socialism," NBER Working Papers 3791, National Bureau of Economic Research, Inc.
  2. Rodrik, Dani, 1991. "Policy uncertainty and private investment in developing countries," Journal of Development Economics, Elsevier, Elsevier, vol. 36(2), pages 229-242, October.
  3. Bela Balassa, 1978. "Export incentives and export performance in developing countries: A comparative analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 114(1), pages 24-61, March.
  4. Pindyck, Robert S. & Solimano, Andres, 1993. "Economic instability and aggregate investment," Policy Research Working Paper Series 1148, The World Bank.
  5. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers, Princeton, Department of Economics - Financial Research Center 91, Princeton, Department of Economics - Financial Research Center.
  6. Carmichael, Calum M., 1987. "The control of export credit subsidies and its welfare consequences," Journal of International Economics, Elsevier, Elsevier, vol. 23(1-2), pages 1-19, August.
  7. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  8. McCulloch, Rachel, 1993. "The Optimality of Free Trade: Science or Religion?," American Economic Review, American Economic Association, American Economic Association, vol. 83(2), pages 367-71, May.
  9. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  10. Staiger, Robert W & Tabellini, Guido, 1987. "Discretionary Trade Policy and Excessive Protection," American Economic Review, American Economic Association, American Economic Association, vol. 77(5), pages 823-37, December.
  11. Low, Patrick, 1982. "Export subsidies and trade policy: The experience of Kenya," World Development, Elsevier, Elsevier, vol. 10(4), pages 293-304, April.
  12. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, American Economic Association, vol. 64(3), pages 291-303, June.
  13. Rodrik, Dani, 1992. "Political economy and development policy," European Economic Review, Elsevier, Elsevier, vol. 36(2-3), pages 329-336, April.
  14. Charles R. Frank Jr. & Kwang Suk Kim & Larry E. Westphal, 1975. "Foreign Trade Regimes and Economic Development: South Korea," NBER Books, National Bureau of Economic Research, Inc, number fran75-1.
  15. Thomas, Vinod & Nash, John, 1991. "Reform of Trade Policy: Recent Evidence from Theory and Practice," World Bank Research Observer, World Bank Group, World Bank Group, vol. 6(2), pages 219-40, July.
  16. Dixit, Avinash K, 1989. "Trade and Insurance with Adverse Selection," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 56(2), pages 235-47, April.
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Cited by:
  1. Bernard Hoekman, 2004. "Policies Facilitating Firm Adjustment to Globalization," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 20(3), pages 457-473, Autumn.
  2. Dani Rodrick, 2003. "Growth Strategies," Economics working papers, Department of Economics, Johannes Kepler University Linz, Austria 2003-17, Department of Economics, Johannes Kepler University Linz, Austria.
  3. Keuschnigg, Christian & Kohler, Wilhelm, 1996. "Commercial policy and dynamic adjustment under monopolistic competition," Journal of International Economics, Elsevier, Elsevier, vol. 40(3-4), pages 373-409, May.
  4. Hoekman, Bernard M. & Maskus, Keith E. & Saggi, Kamal, 2004. "Transfer of technology to developing countries : unilateral and multilateral policy options," Policy Research Working Paper Series 3332, The World Bank.
  5. Gabriel Porcile & Gilberto Tadeu Lima, 2006. "Real Exchange Rate And Elasticity Of Labor Supply In A Balance-Of-Payments-Constrained Macrodynamics," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting], ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of G 11, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  6. Gunseli Berik, 2006. "Growth with Gender Inequity: Another Look at East Asian Development," Working Paper Series, Department of Economics, University of Utah, University of Utah, Department of Economics 2006_03, University of Utah, Department of Economics.
  7. Mody, Ashoka, 1999. "Industrial policy after the East Asian crisis - from"outward orientation"to new internal capabilities?," Policy Research Working Paper Series 2112, The World Bank.
  8. Christian Helmers & Natalia Trofimenko, 2010. "Export Subsidies in a Heterogeneous Firms Framework: Evidence from Colombia," Economics Series Working Papers CSAE WPS/2010-26, University of Oxford, Department of Economics.

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