Export subsidies and foreign capital inflows |
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Authors: | Pascalis Raimondos |
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Affiliation: | Economic Policy Research Unit , Copenhagen Business School, Denmark |
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Abstract: | The welfare effect of a foreign capital inflow in an economy which practises an export-oriented trade policy is examined. The latter takes the form of optimally designed export subsidies, minimizing the welfare costs of existing import tariffs. Under the practice of this policy, an inflow of foreign capital is shown to have anambiguous welfare effect. An empirically relevant condition for welfare improvement is derived and discussed. |
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