Nottingham Centre for Research on
Globalisation and Economic Policy (GEP)
   
   
  

GEP 16/03 Protectionism through Exporting: Subsidies with Export Share Requirements in China

Summary

We study the effect of subsidies subject to export share requirements, that is, conditioned on a firm exporting at least a given fraction of its output. We show that this type of subsidy boosts exports more and provides greater protection for domestic firms than a standard unconditional export subsidy, albeit at a substantial welfare cost.   

Abstract

We study the effect of subsidies subject to export share requirements (ESR) — that is, conditioned on a firm exporting at least a given fraction of its output — on exports, the intensity of competition and welfare, through the lens of a two-country model of trade with heterogeneous firms. Our calibrated model suggests that this type of subsidy boosts exports more and provides greater protection for domestic firms than a standard unconditional export subsidy, albeit at a substantial welfare cost.

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Authors

Fabrice Defever and Alejandro Riaño

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Posted on Monday 25th April 2016

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