Robust rules for industrial policy in open economics

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Title: Robust rules for industrial policy in open economics
Authors: Leahy, Dermot
Neary, J. Peter
Permanent link: http://hdl.handle.net/10197/1281
Date: 24-Jan-2001
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
Keywords: Cost-reducing investment;Export subsidies;Market-expanding investment;R&D subsidies;Strategic industrial policy;Strategic trade policy
Subject LCSH: Commercial policy
Subsidies
Competition, Imperfect
Industrial policy
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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