EXPORT SUBSIDIES AND THE FIRST-MOVER (DIS)ADVANTAGE

Matloob Piracha

The Singapore Economic Review (SER), 2011, vol. 56, issue 01, 41-50

Abstract: In the presence of home firm's ability to make a cost-reducing investment before or after the government set its subsidy level, this paper analyzes the impact of timing on the optimal policy of the government. We find that under complete information assumption, the firm will overinvest and consequently, the government will over-subsidize, resulting in lower welfare levels than would arise under non-intervention. We extend the model to the case in which the home firm has private information about its own costs, which it may want to signal to the government through its investment choice. We find that under this setup, the low-cost firm overinvests even more than under full information case, making the policy of non-intervention even more attractive.

Keywords: Subsidies; investment; signaling; F12; F13 (search for similar items in EconPapers)
Date: 2011
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0217590811004080
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:serxxx:v:56:y:2011:i:01:n:s0217590811004080

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0217590811004080

Access Statistics for this article

The Singapore Economic Review (SER) is currently edited by Euston Quah

More articles in The Singapore Economic Review (SER) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().