Strategic Export Subsidies and Reciprocal Trade Agreements: The Natural Monopoly Case
Why do governments seek restrictions on the use of export subsidies through reciprocal trade agreements such as GATT? With existing arguments, it is possible to understand GATT's restrictions on export subsidies as representing an inefficient victory of the interests of exporting governments over the interests of importing governments. However, to our knowledge, there does not exist a formal theoretical treatment that provides circumstances under which GATT's restrictions on export subsidies can be given a world-wide efficiency rationale. In this paper, we offer one such treatment in the context of a natural monopoly market. We emphasize that subsidy competition between governments can serve to coordinate the entry decisions of firms, finding that consumers in the importing countries may suffer if the coordination afforded exporters by government subsidy programs does more to prevent entry than to promote it. In such circumstances, we show that the existence of export subsidy programs can lead to inefficiencies, and importing countries and the world as a whole can be better off when such programs are banned.
|Date of creation:||Apr 1996|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.kellogg.northwestern.edu/research/math/
More information through EDIRC
|Order Information:|| Email: |
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.:
- Jonathan Eaton & Gene M. Grossman, 1983.
"Optimal Trade and Industrial Policy Under Oligopoly,"
NBER Working Papers
1236, National Bureau of Economic Research, Inc.
- repec:bla:restud:v:50:y:1983:i:4:p:707-22 is not listed on IDEAS
- Kyle Bagwell & Robert W. Staiger, 1996.
"Reciprocal Trade Liberalization,"
1150, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Barbara J. Spencer & James A. Brander, 1982.
"International R&D Rivalry and Industrial Strategy,"
518, Queen's University, Department of Economics.
- 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.
- Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
- Maggi, Giovanni, 1996. "Strategic Trade Policies with Endogenous Mode of Competition," American Economic Review, American Economic Association, vol. 86(1), pages 237-58, March.
- Dixit, Avinash K & Kyle, Albert S, 1985. "The Use of Protection and Subsidies for Entry Promotion and Deterrence," American Economic Review, American Economic Association, vol. 75(1), pages 139-52, March.
- Kyle Bagwell & Robert W. Staiger, 1989.
"The Sensitivity of Strategic and Corrective R&D Policy in Battles for Monopoly,"
868, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Bagwell, Kyle & Staiger, Robert W, 1992. "The Sensitivity of Strategic and Corrective R&D Policy in Battles for Monopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(4), pages 795-816, November.
- Kyle Bagwell & Robert W. Staiger, 1990. "The Sensitivity of Strategic and Corrective R&D Policy in Battles for Monopoly," NBER Working Papers 3235, National Bureau of Economic Research, Inc.
- Bagwell, Kyle & Ramey, Garey, 1994. "Coordination Economies, Advertising, and Search Behavior in Retail Markets," American Economic Review, American Economic Association, vol. 84(3), pages 498-517, June.
When requesting a correction, please mention this item's handle: RePEc:nwu:cmsems:1156. 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: (Fran Walker)
If references are entirely missing, you can add them using this form.