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Non-scale endogenous growth effects of subsidies for exporters

  • Óscar Afonso

    ()

    (CEFUP, NIFIP, OBEGEF, Faculdade de Economia, Universidade do Porto)

  • Armando Silva

    ()

    (Instituto Politécnico do Porto-ESEIG)

We built a general equilibrium endogenous growth model in which final goods are produced either in the relatively skilled-labour intensive exports sector or in the relatively unskilled-labour intensive domestic sector. We show that, by affecting the technological-knowledge bias, subsidies explain the simultaneous rise in the exports sector, the skill wage premium and the economic growth rate. Then, we use a Portuguese longitudinal database (1996-2003) and implement a propensity score matching approach to shed light upon the causal nexus between production-related subsidies and exports. Our empirical results seem to prove the theoretical predictions: subsides generate the rise in the wage premium of exporters and the increase in the relative size of export sector, even if no impact of subsidies is found in the capacity of enhancing new exporters.

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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 429.

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Length: 30 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:por:fepwps:429
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