Rent-Shifting Export Subsidies with an Imported Intermediate Product

40 Pages Posted: 9 May 1998 Last revised: 14 May 2000

See all articles by Jota Ishikawa

Jota Ishikawa

Hitotsubashi University-Faculty of Economics

Barbara J. Spencer

University of British Columbia (UBC) - Sauder School of Business; National Bureau of Economic Research (NBER)

Date Written: February 1996

Abstract

This paper argues that export subsidies aimed at shifting rents from foreign to domestic producers of a final good may also serve to shift rents to foreign firms supplying an intermediate good, weakening the incentive for the subsidy. By contrast, assuming Cournot competition for both the final and intermediate goods, this second layer of rent-shifting between final and intermediate good firms can strengthen the argument for an export subsidy if intermediate good firms are domestic. The domestic welfare implications of alternative rent-shifting policies (a production subsidy and an import tariff) at the intermediate good stage are also considered.

Suggested Citation

Ishikawa, Jota and Spencer, Barbara J., Rent-Shifting Export Subsidies with an Imported Intermediate Product (February 1996). NBER Working Paper No. w5458. Available at SSRN: https://ssrn.com/abstract=4088

Jota Ishikawa

Hitotsubashi University-Faculty of Economics ( email )

2-1 Naka, Kunitachi
Tokyo, Tokyo 186-8601
Japan
+81425808794 (Phone)

Barbara J. Spencer (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8479 (Phone)
604-822-8477 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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