Border Price Changes and Domestic Welfare in the Presence of Subsidised Exports

Rodney Tyers and Rodney Falvey

Oxford Economic Papers, 1989, vol. 41, issue 2, 434-51

Abstract: Export subsidies have been prominent in the recent trade dispute between the United States and the European Community. Implicit in this dispute is the notion that each party expects to gain from unilateral liberalization by the other. In this paper, it is first established analytically that increases in export prices can have ambiguous net welfare effects when at least some exports are subsidized. It is shown that the extent to which border price changes are transmitted to domestic markets is a key determinant of the direction and magnitude of net welfare effects. Copyright 1989 by Royal Economic Society.

Date: 1989
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