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Export-promoting production subsidies and the dynamic gains from experience


  • Michael Benarroch
  • James Gaisford


This paper examines export-promoting production subsidies in a dynamic product-cycle model with learning by doing and spillovers from experience. History dictates that the South is less experienced than the North and, thus, produces less advanced goods. Non-uniform Southern export promoting production subsidies applied to a small set of marginal industries that are on the verge of being internationally competitive, generate conventional static benefits for the South and costs for the North. Since such an industrial policy expands the South's range of production, it ultimately enhances Southern learning. The South's rate of production and technology transfer and the North's rate of innovation both increase, creating dynamic benefits for each country. While the South must gain overall, the North will also gain if the dynamic benefits outweigh the static costs.

Suggested Citation

  • Michael Benarroch & James Gaisford, 2001. "Export-promoting production subsidies and the dynamic gains from experience," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 10(3), pages 291-320.
  • Handle: RePEc:taf:jitecd:v:10:y:2001:i:3:p:291-320 DOI: 10.1080/09638190110061320

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    References listed on IDEAS

    1. Benarroch, M., 1996. "Scale economies, wage differentials, and North-South trade," Journal of Development Economics, Elsevier, vol. 51(2), pages 327-342, December.
    2. Grossman, Gene M. & Helpman, Elhanan, 1995. "Technology and trade," Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 25, pages 1279-1337 Elsevier.
    3. Barbara J. Spencer & James A. Brander, 1983. "International R & D Rivalry and Industrial Strategy," Review of Economic Studies, Oxford University Press, vol. 50(4), pages 707-722.
    4. S. Clemhout & H. Y. Wan, 1970. "Learning-by-Doing and Infant Industry Protection," Review of Economic Studies, Oxford University Press, vol. 37(1), pages 33-56.
    5. Benarroch Michael & James Gaisford, 2002. "Learning, experience and the dynamics of north-south Trade and technology transfer," International Economic Journal, Taylor & Francis Journals, vol. 16(2), pages 65-83.
    6. Itoh, Motoshige & Kiyono, Kazuharu, 1987. "Welfare-Enhancing Export Subsidies," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 115-137, February.
    7. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
    8. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
    9. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 369-405.
    10. Heling Shi & Xiaokai Yang, 2006. "A New Theory Of Industrialization," World Scientific Book Chapters,in: Inframarginal Contributions To Development Economics, chapter 17, pages 437-460 World Scientific Publishing Co. Pte. Ltd..
    11. Krugman, Paul, 1987. "The narrow moving band, the Dutch disease, and the competitive consequences of Mrs. Thatcher : Notes on trade in the presence of dynamic scale economies," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 41-55, October.
    12. Teubal, Morris, 1973. "Comparative advantage and technological change: The learning by doing case," Journal of International Economics, Elsevier, vol. 3(2), pages 161-177, May.
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    Cited by:

    1. Vallejo, Bertha, 2005. "Firms’ Learning Capabilities under a New Economic Environment: A Case Study of Mexican Auto Parts Firms," UNU-INTECH Discussion Paper Series 05, United Nations University - INTECH.
    2. Kazuhiko Yokota & Akinori Tomohara, 2009. "Extending the Learning-By-Exporting Hypothesis: Introducing a Credit Constraint," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 15(2), pages 169-177, May.
    3. repec:kap:iaecre:v:15:y:2009:i:2:p:169-177 is not listed on IDEAS
    4. An, Galina & Iyigun, Murat F., 2004. "The export technology content, learning by doing and specialization in foreign trade," Journal of International Economics, Elsevier, vol. 64(2), pages 465-483, December.


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