The Cyclical Effects of Incremental Export Subsidies

Ephraim Kleiman and Jonathan Pincus

The Economic Record, 1981, vol. 57, issue 2, 140-149

Abstract: The Crawford Committee on structural adjustment in Australia recommended a subsidy to be paid on the excess of manufacturing export revenues over the average of some number of previous years. Schemes, of this nature have been used in New Zealand. Pakistan, Singapore and elsewhere, and may produce a regular cycle in exports and in domestic prices and quantities. A subsidy‐induced cycle is unlikely to be avoided in most Australian manufacturing export industries, except under conditions of rapid inflation or productivity ‐growth. The cyclical pattern can be avoided, at some cost to the Treasury, by setting the subsidy base at some fraction of actual past performance.

Date: 1981
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