Non-scale endogenous growth effects of subsidies for exporters

Oscar Afonso and Armando Silva ()

Economic Modelling, 2012, vol. 29, issue 4, 1248-1257

Abstract: We built a general equilibrium endogenous growth model in which final goods are produced either in the relatively skilled-labour intensive exports sector or in the relatively unskilled-labour intensive domestic sector. We show that, by affecting the technological-knowledge bias, subsidies explain the simultaneous rise in the exports sector, the skill wage premium and the economic growth rate. Then, to shed light upon the causal nexus between production-related subsidies and exports, we use a Portuguese longitudinal database (1996–2003) and implement a propensity score matching approach. Empirical results seem to prove the theoretical predictions: subsidies generate the rise in the wage premium of exporters and the increase in the relative size of export sector, even if no impact of subsidies is found in the capacity of transforming domestic firms into new exporters.

Keywords: Subsidies; Exports; Scale-invariant growth; Wages (search for similar items in EconPapers)
JEL-codes: C61 F13 F14 H29 J31 O31 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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Working Paper: Non-scale endogenous growth effects of subsidies for exporters (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:4:p:1248-1257

DOI: 10.1016/j.econmod.2012.04.019

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