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

  • Rodrik, Dani

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 Bolivia, Brazil, India, Kenya, Korea, and Turkey 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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 900.

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Date of creation: Feb 1994
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Handle: RePEc:cpr:ceprdp:900
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  1. Staiger, Robert W & Tabellini, Guido, 1987. "Discretionary Trade Policy and Excessive Protection," American Economic Review, American Economic Association, vol. 77(5), pages 823-37, December.
  2. Dani Rodrik, 1989. "Policy Uncertainty and Private Investment in Developing Countries," NBER Working Papers 2999, National Bureau of Economic Research, Inc.
  3. Robert S. Pindyck & Andres Solimano, 1993. "Economic Instability and Aggregate Investment," NBER Working Papers 4380, National Bureau of Economic Research, Inc.
  4. Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May.
  5. Rodrik, Dani, 1992. "Political economy and development policy," European Economic Review, Elsevier, vol. 36(2-3), pages 329-336, April.
  6. Carmichael, Calum M., 1987. "The control of export credit subsidies and its welfare consequences," Journal of International Economics, Elsevier, vol. 23(1-2), pages 1-19, August.
  7. McCulloch, Rachel, 1993. "The Optimality of Free Trade: Science or Religion?," American Economic Review, American Economic Association, vol. 83(2), pages 367-71, May.
  8. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  9. Andrei Shleifer & Robert Vishny, 1991. "Pervasive Shortages Under Socialism," NBER Working Papers 3791, National Bureau of Economic Research, Inc.
  10. Bela Balassa, 1978. "Export incentives and export performance in developing countries: A comparative analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 114(1), pages 24-61, March.
  11. Dixit, Avinash K, 1989. "Trade and Insurance with Adverse Selection," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 235-47, April.
  12. 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, May.
  13. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-38, June.
  14. Thomas, Vinod & Nash, John, 1991. "Reform of Trade Policy: Recent Evidence from Theory and Practice," World Bank Research Observer, World Bank Group, vol. 6(2), pages 219-40, July.
  15. Low, Patrick, 1982. "Export subsidies and trade policy: The experience of Kenya," World Development, Elsevier, vol. 10(4), pages 293-304, April.
  16. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
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