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The superiority among specific, demand ad valorem and cost ad valorem subsidy regimes

Wen-Jung Liang (), Kuang Cheng Andy Wang and Ping-Yao Chou
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Wen-Jung Liang: National Dong Hwa University
Kuang Cheng Andy Wang: Chang Gung University, Chang Gung Memorial Hospital
Ping-Yao Chou: National Central University

Journal of Economics, 2018, vol. 123, issue 1, 1-21

Abstract: Abstract We analyze the superiority of the specific, demand and cost ad valorem subsidies in industrial and export policies. The criterion employed to measure the ranking of the superiority of the subsidy policies in this paper is that, given an identical total output, the smaller the amount of the subsidy, the superior the subsidy policy. We show that the demand ad valorem subsidy is the least efficient policy, regardless of whether it is measured in regard to the industrial or export subsidy policies. The superiority related to the specific and cost ad valorem subsidies hinges upon the production technology. We can thus provide a theoretical explanation to the real world phenomenon as to why governments usually offer a specific or cost ad valorem subsidy policy to agricultural products and exports.

Keywords: Specific subsidy; Demand ad valorem subsidy; Cost ad valorem subsidy; The industrial policy; The export policy (search for similar items in EconPapers)
JEL-codes: L52 F13 (search for similar items in EconPapers)
Date: 2018
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