Can Developing Countries Benefit from Strategic Export Promotion?
Causal observation shows that many developing countries adopt certain strategic trade measures such as export subsidies and domestic currency devaluation to promote their exports. Are there any economic rationality behind these measures? The answer is yes. Using a general equilibrium model, we find that export subsidies and devaluation can unambiguously raise labour employment and the output of export firms. But whether these measures can stimulates the output of non-export domestic firms depends on a sufficient and necessary condition given in this paper.
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