Rent-Shifting Export Subsidies with an Imported Intermediate Product

Jota Ishikawa and Barbara J. Spencer

Chapter 13 in Strategic Trade Policy, 2026, pp 307-350 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter examines the implications of foreign or domestic imperfect competition in intermediate-goods supply for strategic trade policy. Assuming Cournot competition, an export subsidy aimed at shifting rents from foreign to domestic final-good producers may also shift rents to foreign suppliers, weakening the incentive for the subsidy. However, the incentive for a subsidy tends to increase if the intermediate-good industry is purely domestic or if the industry is purely foreign, but the subsidy reduces the price of the imported input. Alternative rent-shifting policies (a production subsidy and an import tariff) applied to the input are also considered.

Keywords: Strategic Trade Policy; Rent-shifting; Monopoly; Oligopoly; Oligopsony; Trade Liberalization; Trade Costs; Tariffs; Subsidies; Foreign Direct Investment; Outsourcing; Segmented Markets; Integrated Markets; Intermediate Products; Vertical Market Structure; Information (search for similar items in EconPapers)
JEL-codes: F1 F10 F13 L1 (search for similar items in EconPapers)
Date: 2026
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