A Welfare Comparison Between Export Subsidies and Exchange Rate Depreciation
This paper develops a Bertrand Price Competition model with differentiated goods in which export subsidies are compared to exchange rate depreciation as different government policies for promoting exports. National governments may wish to help domestic firms to expand market shares in profitable areas and might do this through either one of these two tools. Their effects on equilibrium values are analyzed and compared. It is shown that while the two examined trade policies give rise to the same highest welfare, they could produce some significant differences according to circumstances. If the exchange rate is sufficiently high and the level of the nominal wage sufficiently low, the marginal effect of the subsidy will be higher. But if unions are strong (and demand a high nominal wage) and the exchange rate is sufficiently low, the governments could also consider a depreciation as an alternative policy to export subsidies.
|Date of creation:||Oct 1999|
|Contact details of provider:|| Postal: Josefstädterstr. 39, A-1080 Vienna, Austria|
Phone: ++43 - (0)1 - 599 91 - 0
Fax: ++43 - (0)1 - 599 91 - 555
Web page: http://www.ihs.ac.at
More information through EDIRC
|Order Information:|| Postal: Institute for Advanced Studies - Library, Josefstädterstr. 39, A-1080 Vienna, Austria|
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.:
- Alan Kirman & Louis Phlips, 1996. "Exchange-rate pass-through and market structure," Journal of Economics, Springer, vol. 64(2), pages 129-154, June.
- Schwartz, Marius, 1987. "The Competitive Effects of Vertical Agreements: Comment," American Economic Review, American Economic Association, vol. 77(5), pages 1063-1068, December.
- James A. Brander & Barbara J. Spencer, 1984.
"Export Subsidies and International Market Share Rivalry,"
NBER Working Papers
1464, National Bureau of Economic Research, Inc.
- 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.
- Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
- Jonathan Eaton & Gene M. Grossman, 1986.
"Optimal Trade and Industrial Policy Under Oligopoly,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 101(2), pages 383-406.
- Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
- Maggi, Giovanni, 1996. "Strategic Trade Policies with Endogenous Mode of Competition," American Economic Review, American Economic Association, vol. 86(1), pages 237-258, March.
- Mathewson, G Frank & Winter, Ralph A, 1987. "The Competitive Effects of Vertical Agreements: Comment," American Economic Review, American Economic Association, vol. 77(5), pages 1057-1062, December.
When requesting a correction, please mention this item's handle: RePEc:ihs:ihsesp:75. 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: (Doris Szoncsitz)
If references are entirely missing, you can add them using this form.