EconPapers    
Economics at your fingertips  
 

Market Reactions to Export Subsidies

Mihir A. Desai and James Hines ()

No 10233, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes the economic impact of export subsidies by investigating stock price reactions to a critical event in 1997. On November 18, 1997, the European Union announced its intention to file a complaint before the World Trade Organization (WTO), arguing that the United States provided American exporters illegal subsidies by permitting them to use Foreign Sales Corporations to exempt a fraction of export profits from taxation. Share prices of American exporters fell sharply on this news, and its implication that the WTO might force the United States to eliminate the subsidy. The share price declines were largest for exporters whose tax situations made the threatened export subsidy particularly valuable. Share prices of exporters with high profit margins also declined markedly on November 18, 1997, suggesting that the export subsidies were most valuable to firms earning market rents. This last evidence is consistent with strategic trade models in which export subsidies improve the competitive positions of firms in imperfectly competitive markets.

JEL-codes: F12 F13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lam
Date: 2004-01
Note: ITI AP PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Published as Desai, Mihir A. & Hines Jr., James R., 2008. "Market reactions to export subsidies," Journal of International Economics, Elsevier, vol. 74(2), pages 459-474, March.

Downloads: (external link)
http://www.nber.org/papers/w10233.pdf (application/pdf)

Related works:
Journal Article: Market reactions to export subsidies (2008) Downloads
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:nbr:nberwo:10233

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w10233

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2019-07-22
Handle: RePEc:nbr:nberwo:10233