The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Trade Subsidies

  • Murray C. Kemp
Reference work entry


That it may be in the interest of a prince or nation to subsidize foreign trade is an ancient doctrine. However, the manner in which subsidization has been justified and the means by which it has been effected have changed radically over the years. In the 17th and 18th centuries, the subsidization of exports was a corollary of the general Mercantilist doctrines of the time (Viner 1937); and the British Navigation Acts were defended, even by Adam Smith (1776), as ensuring that England would be adequately provided with ships and sailors in time of war. In the 19th century, Alexander Hamilton and the economists List, J.S. Mill and Bastable argued that industries which in the face of foreign competition are unprofitable but which are capable of learning might qualify for temporary support (see Kemp 1974, for a modern statement of this ‘infant industry’ doctrine). And some 20th-century economists have advocated export subsidies as a means of alleviating unemployment.

This is a preview of subscription content, log in to check access.


  1. Fukushima, T. 1979. Tariff structure, nontraded goods and the theory of piecemeal policy recommendations. International Economic Review 20(2): 427–435.CrossRefGoogle Scholar
  2. Fukushima, T. 1981. A dynamic quantity adjustment process in a small open economy, and welfare effects of tariff changes. Journal of International Economics 11(4): 513–529.CrossRefGoogle Scholar
  3. Hatta, T. 1977. A recommendation for a better tariff structure. Econometrica 45(8): 1859–1869.CrossRefGoogle Scholar
  4. Kemp, M.C. 1966. Note on a Marshallian conjecture. Quarterly Journal of Economics 80: 481–484.CrossRefGoogle Scholar
  5. Kemp, M.C. 1974. Learning by doing: formal tests for intervention in an open economy. Keio Economic Studies 11(1): 1–7.Google Scholar
  6. Lerner, A.P. 1936. The symmetry between import and export taxes. Economica 3: 306–313.CrossRefGoogle Scholar
  7. Lloyd, P.J. 1974. A more general theory of price distortions in open economies. Journal of International Economics 4(4): 365–386.CrossRefGoogle Scholar
  8. Marshall, A. 1926. Memorandum on fiscal policy. In Official papers by Alfred Marshall, ed. J.M. Keynes. London: Macmillan.Google Scholar
  9. Smith, A. 1776. An inquiry into the nature and causes of the wealth of nations, ed. E. Cannan. New York: Modern Library. Reprinted, 1937.Google Scholar
  10. Viner, J. 1937. Studies in the theory of international trade. London: George Allen & Unwin.Google Scholar
  11. Young, L., and M.C. Kemp. 1982. On the optimal stabilization of internal producers’ prices in international trade. International Economic Review 23(1): 123–141.CrossRefGoogle Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Murray C. Kemp
    • 1
  1. 1.