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Export-Promoting Policies, Agglomeration, and Growth

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  • Johdo Wataru

    (Tokyo Keizai University, Department of Economics, Tokyo Japan)

Abstract

This paper examines the impact of trade subsidies on global growth and national welfare through the cross-border movement of firms in an endogenous growth model. In particular, our model focuses on two key aspects: the cross-border movement of firms and the reallocation of labor resources between the production and innovation sectors. In this paper, we show that, in the presence of local knowledge spillovers, an increase in the trade subsidy by the country where firms are agglomerated leads to an increase in the global growth rate under certain parameter conditions, while an increase in the trade subsidy by the country that is not agglomerated results in a decrease in the global growth rate. Moreover, the results of the welfare analysis show that trade subsidies in the agglomeration country enhance the welfare of both the agglomeration and the non-agglomeration countries, whereas trade subsidies in non-agglomeration country diminish the welfare of both countries.

Suggested Citation

  • Johdo Wataru, 2025. "Export-Promoting Policies, Agglomeration, and Growth," Economic Themes, Sciendo, vol. 63(1), pages 59-80.
    • Handle: RePEc:vrs:ecothe:v:63:y:2025:i:1:p:59-80:n:1005
    DOI: 10.2478/ethemes-2025-0004
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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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