21%20Pushing%20Exports--Export%20Subsidies

21%20Pushing%20Exports--Export%20Subsidies - Pushing...

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1 1 Pushing Exports—Export Subsidies • Export Subsidies • Export Taxes 2 Export Subsidies •An export subsidy is a payment to a firm that sells a good abroad. – It can be either specific or ad valorem . 3 Export Subsidies • The effects of export subsidies vary depending on the size of the country in international trade. – “Small” countries – “Large” countries • In either case, the domestic and foreign markets MUST be segmented . 4 The Small Country Case • Suppose a small” country provides a specific export subsidy of $XS on some exported good.
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2 5 Small Country Price Effects Q P S D P W D 0 S 0 X 0 6 Small Country Price Effects Price Effects of the Export Subsidy: 1. Domestic price rises from P W to P XS 2. Domestic demand falls from D 0 to D 1 3. Domestic supply rises from S 0 to S 1 4. Exports rise from X 0 to X 1 5. World price stays at P W 7 Small Country Welfare Effects Q P S D P W P XS D 1 D 0 S 0 S 1 X 0 X 1 XS 8 Small Country Welfare Effects Change in : Consumer surplus = Producer surplus = Government revenue = Net effect on exporter’s welfare =
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3 9 Small Country Welfare Effects
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21%20Pushing%20Exports--Export%20Subsidies - Pushing...

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