Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/221512
Authors: 
Bagwell, Kyle
Staiger, Robert W.
Year of Publication: 
1996
Series/Report no.: 
Discussion Paper No. 1156
Abstract: 
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.
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.