Uniform Output Subsidies in an Economic Union with Firms Heterogeneity
In this paper we show the importance of cost asymmetry and demand curvature in the effect of a uniform output subsidy policy in an economic union. We consider an economic union formed by two countries each with a single firm producing a homogeneous good. We find that when firms have different cost, the optimal level of the uniform subsidy can be negative if the demand is concave enough. The low cost firm expands its market share if the demand function is sufficiently convex whereas in the case of a concave demand function it is the higher cost firm which gains market share. This implies that a uniform output subsidy policy may cause a change in production e¢ciency. Finally, we consider how a divergence between private and social costs of public funds may a¤ect the desirability of such a subsidy policy.
(This abstract was borrowed from another version of this item.)
|Date of creation:|
|Contact details of provider:|| Web page: http://www.fedea.net|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dick, Andrew R., 1993. "Strategic trade policy and welfare : The empirical consequences of cross-ownership," Journal of International Economics, Elsevier, vol. 35(3-4), pages 227-249, November.
- Neary, J. Peter, 1994.
"Cost asymmetries in international subsidy games: Should governments help winners or losers?,"
Journal of International Economics,
Elsevier, vol. 37(3-4), pages 197-218, November.
- J. Peter Neary, 1990. "Cost asymmetries in international subsidy games : should governments help winners or losers?," Working Papers 199008, School of Economics, University College Dublin.
- Neary, James Peter, 1991. "Cost asymmetries in international subsidy games: Should governments help winners or losers?," Discussion Papers, Series II 147, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
- Neary, J Peter, 1991. "Cost Asymmetries in International Subsidy Games: Should Governments Help Winners or Losers?," CEPR Discussion Papers 560, C.E.P.R. Discussion Papers.
- Browning, Edgar K, 1987. "On the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 77(1), pages 11-23, March.
- Ngo, Van Long & Soubeyran, Antoine, 1997. "Cost heterogeneity, industry concentration and strategic trade policies," Journal of International Economics, Elsevier, vol. 43(1-2), pages 207-220, August.
- Van Long, N. & Soubeyran, A., 1996. "Cost Heterogeneity, Industry Concentration and Startegic Trade Policies," G.R.E.Q.A.M. 96a39, Universite Aix-Marseille III.
- Lee, Sanghack, 1990. "International equity markets and trade policy," Journal of International Economics, Elsevier, vol. 29(1-2), pages 173-184, August.
- Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
- James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
- David de Meza, 1986. "Export Subsidies and High Productivity: Cause or Effect?," Canadian Journal of Economics, Canadian Economics Association, vol. 19(2), pages 347-350, May.
- Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-138, March. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:fda:fdadef:00-06. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carmen Arias)
If references are entirely missing, you can add them using this form.