Export promotion and welfare

Abstract

In view of the acknowledged success of the post-war Japan, where export promotion policies have played an important role, the role of subsidies in export industries should be studied from the point of view of the welfare of a country in an international economy. Except for the case of domestic distortions (see Problem 13.3), however, it is difficult to justify export subsidy by the use of the standard two-country two-commodity model of the international trade theory. In fact, it seems to be a well-established fact the export subsidies always reduce a country’s economic welfare in a competitive economy with full price flexibility.