NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Export Subsidies and International Market Share Rivalry

James A. Brander, Barbara J. Spencer

NBER Working Paper No. 1464
Issued in September 1984
NBER Program(s):   ITI   IFM

Countries often perceive themselves as being in competition with each other for profitable international markets. In such a world export subsidies can appear as attractive policy tools, from a national point of view, because they improve the relative position of a domestic firm in noncooperative rivalries with foreign firms, enabling it to expand its market share and earn greater profits. In effect, subsidies change the initial conditions of the game that firms play. The terms of trade move against the subsidizing country, but its welfare can increase because, under imperfect competition, price exceeds the marginal cost of exports. International noncooperative equilibriumis characterized by such subsidies on the part of exporting nations, even though they are jointly suboptimal.

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Document Object Identifier (DOI): 10.3386/w1464

Published: Brander, James A. and Barbara J. Spencer. "Export Subsidies and International Market Share Rivalry," Journal of International Economics, Vol. 18, No. 1-2, (Feb. 1985), pp. 83-100. citation courtesy of

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