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Export Subsidies in a Heterogeneous Firms Framework

  • Christian Helmers
  • Natalia Trofimenko

We evaluate the impact of firm-specific export subsidies on exports in Colombia. Using a two-stage Heckman selection procedure, we obtain firm-specific predicted subsidy amounts that can be explained by the characteristics that determine the firms’ eligibility for the government support and its amount. Drawing on the accounts of the discretionary allocation of subsidies in developing countries, we regard the discrepancy between the predicted and the observed subsidy amounts as a proxy for the firm’s ties to government officials. Controlling for observable and unobservable firm characteristics and persistence in exports, we find that although, in general, subsidies exhibit positive impact on export volumes, this impact is diminishing in subsidy size and in the degree of firm’s connectedness to government officials

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1476.

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Length: 20 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:kie:kieliw:1476
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  1. Alexander Hoffmaister, 1992. "The Cost of Export Subsidies: Evidence from Costa Rica," IMF Staff Papers, Palgrave Macmillan, vol. 39(1), pages 148-174, March.
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  3. J. Vicente Blanes & Isabel Busom, 2004. "WHO PARTICIPATES IN R&D SUBSIDY PROGRAMS?. The case of Spanish Manufacturing Firms," Working Papers wpdea0407, Department of Applied Economics at Universitat Autonoma of Barcelona.
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  12. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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  16. Low, Patrick, 1982. "Export subsidies and trade policy: The experience of Kenya," World Development, Elsevier, vol. 10(4), pages 293-304, April.
  17. 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.
  18. Andrew B. Bernard & J. Bradford Jensen, 2004. "Why Some Firms Export," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 561-569, May.
  19. Faini, Ricardo, 1988. "Export supply, capacity, and relative prices," Policy Research Working Paper Series 123, The World Bank.
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