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 3, in Chapter 13), 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.