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| Author: | Bagwell, K. |
| Title: | Optimal export policy for a new-product monopoly |
| Journal: | American Economic Review
1991 : DEC, VOL. 81:5, p. 1156-1169 |
| Index terms: | NEW PRODUCTS MONOPOLY EXPORTS TRADE POLICY SUBSIDIES WELFARE |
| Language: | eng |
| Abstract: | A new welfare-enhancing role is identified for a policy of export subsidization in a new-product industry. An export-subsidy policy promotes the (rational) perception that a high-quality export can be provided at a relatively low price. Thus, an export subsidy generates a first-order benefit to welfare by enabling a high-quality export to be sold at a less-distorted high price. The subsidy will also introduce distortions into the price of a low-quality export and the quality-selection process. Since these choices are initially undistorted, however, the export-country welfare loss arising from new distortions is of second-order importance. |
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