Specific vs Ad Valorem Strategic Export Subsidies with Taxation Distortion |
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| Authors: | Hong Hwang Chao‐Cheng Mai Ya‐Po Yang |
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| Affiliation: | 1. Department of Economics, National Taiwan University, Taipei, Taiwan;2. Research Center for Humanities and Social Sciences, Academia Sinica, New Taipei City, Taiwan;3. Department of Industrial Economics, Tamkang University, New Taipei City, Taiwan;4. Institute of Business and Management, National University of Kaohsiung, Kaohsiung City, Taiwan |
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| Abstract: | This paper employs a model to compare the welfare between optimal specific and ad valorem export subsidies if the subsidy payment is financed by distortional taxation. It is found that the welfare under the specific subsidy regime is higher (lower) than that under the ad valorem subsidy regime if the social cost of taxation distortion is low (high). Moreover, the signs of the two optimal subsidies are also crucially dependent on this social cost. They are positive (negative) if the social cost is low (high). |
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