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    Robust rules for industrial policy in open economies

    Leahy, Dermot (2001) Robust rules for industrial policy in open economies. Journal of International Trade and Economic Development, 10 (4). pp. 393-409. ISSN 0963-8199

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    The theory of strategic trade policy yields ambiguous recommendations for assistance to exporting firms in oligopolistic industries. However, some writers have suggested that investment subsidies are a more robust recommendation than export subsidies. We show that, although ambiguous in principle, the case for investment subsidies is reasonably robust in practice. Except when functional forms exhibit arbitrary nonlinearities, it holds under both Cournot and Bertrand competition, with either costreducing or market-expanding investment, and with or without spillovers. Only if firms have strong asymmetries in their investment behaviour and engage in Bertrand competition is an investment tax clearly justified.

    Item Type: Article
    Keywords: Cost-reducing investment; export subsidies; market-expanding investment; R&D subsidies; strategic industrial policy; strategic trade policy;
    Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
    Item ID: 8469
    Identification Number: 8
    Depositing User: Dermot Leahy
    Date Deposited: 18 Jul 2017 12:23
    Journal or Publication Title: Journal of International Trade and Economic Development
    Publisher: Taylor & Francis
    Refereed: Yes
    Use Licence: This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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