Robust rules for industrial policy in open economics

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Title: Robust rules for industrial policy in open economics
Authors: Leahy, DermotNeary, J. Peter
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Date: 24-Jan-2001
Online since: 2009-07-23T13:52:55Z
Abstract: The theory of strategic trade policy yields ambiguous recommendations for assistance to exporting firms in oligopolistic industries. However, some writers have suggested that investment subsidies are a more robust recommendation than export subsidies. We show that, though ambiguous in principle, the case for investment subsidies is reasonably robust in practice. Except when functional forms exhibit arbitrary non-linearities, it holds under both Cournot and Bertrand competition, with either cost-reducing or market-expanding investment, and with or without spillovers. Only if firms have strong asymmetries in their investment behaviour and engage in Bertrand competition is an investment tax clearly justified.
Funding Details: The Economic and Social Research Council (ESRC)
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Series/Report no.: UCD Centre for Economic Research Working Paper Series; WP00/21
Keywords: Cost-reducing investmentExport subsidiesMarket-expanding investmentR&D subsidiesStrategic industrial policyStrategic trade policy
metadata.dc.subject.classification: F12; L13
Subject LCSH: Commercial policy
Competition, Imperfect
Industrial policy
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Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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