Tariff vs. Export Subsidy: An Endogenous Growth Perspective

Chong Wha Lee
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Chong Wha Lee: Korea Institute for International Economic Policy

Korean Economic Review, 1997, vol. 13, issue 2, 123-144

Abstract: This paper presents an endogenous growth model of an open economy in an infra-industry trade framework. The model is a revised version of the influential work by Rivera-Batiz and Romer (1991a, 1991b) with two distinguishing features: i) an assumption of asymmetry between the two countries engaged in trade, and the long run growth effects of trade policy interaction, particularly tariff pro-tection and export subsidy. With this model, the following three novel features can be derived 1) the long run growth rate of a country is correlated positively with the factor endowment of its trade partner 2) export subsidy can enhance the long run growth rate; 3) the net effect of export subsidy can even surpass the counter-effect of foreign import tariffs.

JEL-codes: E0 F1 (search for similar items in EconPapers)
Date: 1997
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