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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.

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Article provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.

Volume (Year): 10 (2001)
Issue (Month): 3 ()
Pages: 291-320

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Handle: RePEc:taf:jitecd:v:10:y:2001:i:3:p:291-320
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  1. Spencer, Barbara J & Brander, James A, 1983. "International R & D Rivalry and Industrial Strategy," Review of Economic Studies, Wiley Blackwell, vol. 50(4), pages 707-22, October.
  2. Benarroch, M., 1996. "Scale economies, wage differentials, and North-South trade," Journal of Development Economics, Elsevier, vol. 51(2), pages 327-342, December.
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  6. 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.
  7. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
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